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For-profit higher education in the United States

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For-profit higher education in the United States refers to the commercialization and privatization of American higher education institutions. For-profit colleges have been the most recognizable for-profit institutions, but commercialization has been a part of US higher education for centuries. Privatization of public institutions has also been increasing since at least the 1980s.[1][2]

History

For-profit colleges in the U.S. have their origins in the Colonial Era.[3][4] According to AJ Angulo, 19th century for-profit colleges offering practical skills expanded across the United States, meeting a demand for practical job training. In the 1830s and 1840s, proprietary business schools in Boston, Brooklyn, and Philadelphia offered penmanship and accounting classes. The expansion continued in the 1850s and 1860s, to Chicago, New Orleans, Memphis, and San Jose. Angulo estimated that there were 2,000 for-profit colleges with more than 240,000 students during the period, if fly-by-night schools were included.[5] The Bryant & Stratton Chain School grew to about 50 schools by 1864.[6] As early as 1892, the University of Chicago operated a correspondence school, a money-making strategy emulated by many other universities. The decline of proprietary colleges was aided by the Smith-Hughes Act of 1917. Also known as the National Vocational Education Act, this legislation funded public vocational education.

In 1893, two years after International Correspondence Schools (ICS) started their profitable and increasingly popular business, others followed, including University of Chicago, Penn State College, and University of Wisconsin. Through several social movements and public funding, the US slowly became more inclusive and education became more universal. But some for-profit entities pushed the envelope with deceptive marketing and advertising promising more than they could deliver.[7][8]

Since the early twentieth century critics have complained about money rather than academics driving leadership at traditional universities. Thorstein Veblen's 1918 famous screed on the topic, The Higher Learning in America, was subtitled, "A Memorandum on the Conduct of Universities by Business Men."[9] While nonprofit university leaders have faced increasing pressures to grow funding and endowments, the lines separating nonprofit and for-profit institutions have been more strictly enforced in the U.S. than in nearly any other country, contributing to American dominance in higher education.[10] In 1923, muckraker Upton Sinclair published The Goose Step: A Study of American Education, a 488-page account of monied interests at elite colleges and universities, which concluded that all of the institutions he researched were plutocratic. Sinclair reportedly interviewed 1000 people across the US and used a variety of primary and secondary sources, particularly from the American Association of University Professors. The Goose Step mentions a number of industrialists and entrepreneurs, including Andrew Carnegie (Carnegie Tech), John D. Rockefeller (University of Chicago), Johns Hopkins, J.P. Morgan (Columbia University), and Leland Stanford (Stanford University).[11][12]

In the 1940s, "fly-by-night commercial vocational 'schools' sprang up to collect veterans' tuition grants" due to the newly created GI Bill's lax requirements and limited oversight.[13] For-profit colleges grew from 1972 to 1976, after the Higher Education Act of 1965, part of President Lyndon Johnson's "Great Society" of progressive reforms, was amended so that for-profit colleges could receive Pell Grants and federal student loans.[14][15]

University of Phoenix was a pioneer as a for-profit mega-university, schools of over 80,000 students, with an emphasis on adult learners and a business attitude, and later with an emphasis on online learning. With profit-driven schools, academic labor was faced with unbundling, where "various components of the traditional faculty role (e.g., curriculum design) are divided among different entities, while others (e.g., research) are eliminated altogether."[16]

From 1974 to 1986, for-profit colleges share of Pell Grants rose from 7 percent to 21 percent, even though for-profit colleges only enrolled 5 percent of all higher education students.[17] In the 1980s, public higher education was also increasingly privatized. In the late 1980s, Secretary of Education William Bennett investigated the problems with for-profit higher education; investigators found widespread abuses across the industry.[17]

Regulation and deregulation

Regulations and policies to curb the abuses in for-profit higher education occurred during the presidency of Barack Obama. These actions were rolled back during the Donald Trump administration.[18]

As for-profit colleges face declining enrollment, there has been a blurring between for-profit and non-profit colleges.[19][20] For-profit Online Program Managers (OPMs) include 2U, Academic Partnerships, Bisk Education, Noodle Partners, Pearson Education, and Wiley.[21][22] In 2018, there were more than two dozen OPMs.[22] Human capital contracts, also known as Income Share Agreements (ISAs) may also be seen as for-profit vehicles.[23]

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University of Chicago

University of Chicago

The University of Chicago is a private research university in Chicago. The university, established in 1890, has its main campus in Chicago's Hyde Park neighborhood. Admissions at the University of Chicago are considered highly selective.

Thorstein Veblen

Thorstein Veblen

Thorstein Bunde Veblen was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism.

Muckraker

Muckraker

The muckrakers were reform-minded journalists, writers, and photographers in the Progressive Era in the United States (1890s–1920s) who claimed to expose corruption and wrongdoing in established institutions, often through sensationalist publications. The modern term generally references investigative journalism or watchdog journalism; investigative journalists in the US are occasionally called "muckrakers" informally.

Upton Sinclair

Upton Sinclair

Upton Beall Sinclair Jr. was an American writer, muckraker, political activist and the 1934 Democratic Party nominee for governor of California who wrote nearly 100 books and other works in several genres. Sinclair's work was well known and popular in the first half of the 20th century, and he won the Pulitzer Prize for Fiction in 1943.

The Goose-Step (book)

The Goose-Step (book)

The Goose-step: A Study of American Education is a book, published in 1923, by the American novelist and muckraking journalist Upton Sinclair. It is an investigation into the consequences of plutocratic capitalist control of American colleges and universities. Sinclair writes, “Our educational system is not a public service, but an instrument of special privilege; its purpose is not to further the welfare of mankind, but merely to keep America capitalist." (p. 18)

American Association of University Professors

American Association of University Professors

The American Association of University Professors (AAUP) is an organization of professors and other academics in the United States. AAUP membership includes over 500 local campus chapters and 39 state organizations.

Andrew Carnegie

Andrew Carnegie

Andrew Carnegie was a Scottish-American industrialist and philanthropist. Carnegie led the expansion of the American steel industry in the late 19th century and became one of the richest Americans in history. He became a leading philanthropist in the United States, Great Britain, and the British Empire. During the last 18 years of his life, he gave away around $350 million, almost 90 percent of his fortune, to charities, foundations and universities. His 1889 article proclaiming "The Gospel of Wealth" called on the rich to use their wealth to improve society, expressed support for progressive taxation and an estate tax, and stimulated a wave of philanthropy.

John D. Rockefeller

John D. Rockefeller

John Davison Rockefeller Sr. was an American business magnate and philanthropist. He has been widely considered the wealthiest American of all time and the richest person in modern history. Rockefeller was born into a large family in Upstate New York that moved several times before eventually settling in Cleveland. He became an assistant bookkeeper at age 16 and went into several business partnerships beginning at age 20, concentrating his business on oil refining. Rockefeller founded the Standard Oil Company in 1870. He ran it until 1897 and remained its largest shareholder.

Johns Hopkins

Johns Hopkins

Johns Hopkins was an American merchant, investor, and philanthropist. Born on a plantation, he left his home to start a career at the age of 17, and settled in Baltimore, Maryland, where he remained for most of his life.

Columbia University

Columbia University

Columbia University is a private Ivy League research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhattan, it is the oldest institution of higher education in New York, the fifth-oldest in the United States, and one of nine colonial colleges founded prior to the Declaration of Independence.

Leland Stanford

Leland Stanford

Amasa Leland Stanford was an American industrialist and politician. A member of the Republican Party, he served as the 8th governor of California from 1862 to 1863 and represented California in the United States Senate from 1885 until his death in 1893. He and his wife Jane were also the founders of Stanford University, which they named after their late son. Prior to his political career, Stanford was a successful merchant and wholesaler who built his business empire after migrating to California during the Gold Rush. As president of the Central Pacific Railroad and later the Southern Pacific from 1885 to 1890, he held tremendous power in the region and a lasting impact on California. Stanford is widely considered a robber baron.

Privatization of public higher education

Since the 1980s, public universities, particularly state flagship universities have increasingly relied on for-profit revenue sources and privatization.[24][25][26][27][28]

Privatization of services

Public colleges and universities have also increasingly relied on for-profit businesses for a number of products and services, including food service. For example, Sodexo, Aramark, and Compass Group are three major for-profit food servicers.[29][30]

Affordability and access

Today, most state flagship universities are not affordable for low- and moderate-income families as these schools cater more toward affluent students.[31] According to the U.S. Department of education the cost of 4-year bachelor's degrees, has doubled in the last 30 years even when accounting for inflation.[32] The increased cost of tuition for higher education leads to multiple detrimental effects both socially and economically within the U.S. including preventing access to college education, decreasing individual student health, and increasing the chances of a debt crisis.[33] In 2013, the average cost of tuition was 3.5 times that of a median households annual income. Overall, higher education has been linked to many positive outcomes for an individual as well as society as a whole. Some of these effects include, a better economy and therefor a higher quality of life for all.[33] According to research by Harvard professor Bridget Long, the best way to increase affordability of higher education is to use grants rather than loans, and give more need based scholarships over merit based.[34]

Federal oversight

Since the 1980s, public universities, particularly state flagship universities have increasingly relied on for-profit revenue sources and privatization.[35][36][37][38][39]

From the late 1980s to the mid-1990s, Senator Sam Nunn led for more scrutiny of for-profit colleges. The General Accounting Office (GAO) also found that 135 for-profit colleges contributed to 54% of all student loan defaults. The number of for-profit colleges rose from about 200 in 1986 to nearly 1,000 in 2007.[40] From 1990 to 2009, for-profit colleges grew to 11.8 percent of all undergraduates.[41] For-profit college enrollment expanded even more after the 1998 reauthorization of the Higher Education Act resulted in more deregulation. The industry also grew in the wake of state budget cuts, stagnation, and austerity in funding that grew more visible in the 1980s and 90s.[42] Initial public offerings of Devry, ITT Educational Services, Apollo Education Group, Corinthian Colleges, and Career Education Corporation occurred between 1991 and 1998 and for-profit colleges became "the darlings of Wall Street."[17] The advent of the Internet also helped enrollment as many for-profit colleges were pioneers in online education.[17] The George W. Bush Administration further deregulated the industry as posts at the Department of Education (ED) were filled with for-profit administrators.[43] Increased capitalization of for-profit colleges occurred after Goldman Sachs, Wells Fargo, Blum Capital Partners and Warburg Pincus became large institutional investors in this industry.[44][45][46][47] Private equity in for-profit education was associated with higher costs to students and declining outcomes: less spent on education, more student loan debt and lower student loan repayment rates, lower graduation rates, and lower earnings for graduates.[47]

In the 2009–2010 academic year, for-profit higher education corporations received $32 billion in Title IV funding—more than 20% of all federal aid.[15] More than half of for-profits' revenues were spent on marketing or extracted as profits, with less than half spent on instruction.[48][49][50]

A two-year congressional investigation chaired by Senator Tom Harkin, D-Iowa—examined for-profit higher education institutions. The committee found that $32 billion in federal funds were spent in 2009–2010 on for-profit colleges. The majority of students left without a degree and carried post-schooling debt.[51] Recruitment training manuals at some schools specifically targeted low-income students and attempted to elicit 'pain' and 'fear.'[52] The manuals even included groups to target, including: "welfare mom w/kids", "pregnant ladies", and "experienced a recent death."[52] In 2010, Trump University was closed by the State of New York for operating without a license.[53]

As for-profit colleges began to falter, for-profit online program managers (OPMs) gained momentum. Under the Obama administration (2009–2017), for-profit colleges received greater scrutiny and negative attention from the U.S. government. State Attorneys General, the media, and scholars also investigated these schools.[54][55] For-profit school enrollment reached its peak in 2009.[56][57][58][59] Corinthian Colleges and Education Management Corporation (EDMC) faced enrollment declines and major financial trouble in 2014 and 2015.[60] In 2015, Corinthian Colleges filed for bankruptcy.[61] Enrollment at the University of Phoenix chain fell 70% from its peak[62] In 2016, ITT Technical Institute closed, and the US Department of Education stripped ACICS of its accreditation powers. In 2017, the advocacy group the Debt Collective created its own, unofficial "Defense to Repayment App" allowing former students of schools accused of fraud to pursue debt cancellation.[63]

From 2017 to 2020, the Donald Trump administration accused the government of regulatory overreach and loosened regulations.[64] In 2018 Strayer University and Capella University merged as Strategic Education.[65][66] EDMC sold its remaining schools to the non-profit Dream Foundation and Purdue University purchased Kaplan University.[67] Atalem sold DeVry University to Cogswell Education.[68] In 2018, U.S. Education Secretary Betsy Devos scrapped a 2010 ED "gainful employment" rule.[69][70][71] Later that year, Education Corporation of America began closing its campuses.[72][73] ED also restored ACICS as an accreditor.[74] In 2018 and 2019, Dream Center Education Holdings began closing and selling off schools of the Art Institutes, Argosy University, and South University.[75] In 2019, Argosy University closed. USA Today portrayed the school's collapse as part of a trend, highlighting the losses of other for-profit colleges, including Brightwood College (2018), Vatterott College (2018), and Virginia College (2018).[76][73] In 2019, Betsy DeVos was criticized for allowing five failing for-profit colleges to avoid posting a letter of credit.[77] Accreditor WASC approved Ashford University's conversion to a non-profit. Its parent company, Zovio, continued to be a publicly traded for-profit college company.[78] In December 2020, Congress passed a bill that improved safeguards for veterans exploited by predatory colleges.[79]

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Privatization

Privatization

Privatization can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heavily regulated private company or industry becomes less regulated. Government functions and services may also be privatised ; in this case, private entities are tasked with the implementation of government programs or performance of government services that had previously been the purview of state-run agencies. Some examples include revenue collection, law enforcement, water supply, and prison management.

Sam Nunn

Sam Nunn

Samuel Augustus Nunn Jr. is an American politician who served as a United States Senator from Georgia (1972–1997) as a member of the Democratic Party.

Apollo Education Group

Apollo Education Group

Apollo Education Group, Inc. is an American corporation based in the South Phoenix area of Phoenix, Arizona, with an additional corporate office in Chicago, Illinois.

Corinthian Colleges

Corinthian Colleges

Corinthian Colleges, Inc. (CCi) was a for-profit post-secondary education company in North America. Its subsidiaries offered career-oriented diploma and degree programs in health care, business, criminal justice, transportation technology and maintenance, construction trades, and information technology. A remnant of the schools was owned by ECMC under the Altierus Career College brand until the last three campuses were closed in 2022.

Internet

Internet

The Internet is a global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a network of networks that consists of private, public, academic, business, and government networks of local to global scope, linked by a broad array of electronic, wireless, and optical networking technologies. The Internet carries a vast range of information resources and services, such as the interlinked hypertext documents and applications of the World Wide Web (WWW), electronic mail, telephony, and file sharing.

George W. Bush

George W. Bush

George Walker Bush is an American retired politician who served as the 43rd president of the United States from 2001 to 2009. A member of the Republican Party and the Bush family, he previously served as the 46th governor of Texas from 1995 to 2000.

Goldman Sachs

Goldman Sachs

Goldman Sachs is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, Hong Kong, Tokyo, Dallas and Salt Lake City, and additional offices in other international financial centers. Goldman Sachs is the second largest investment bank in the world by revenue and is ranked 57th on the Fortune 500 list of the largest United States corporations by total revenue. It is considered a systemically important financial institution by the Financial Stability Board.

Wells Fargo

Wells Fargo

Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California; operational headquarters in Manhattan; and managerial offices throughout the United States and internationally. The company has operations in 35 countries with over 70 million customers globally. It is considered a systemically important financial institution by the Financial Stability Board. Wells Fargo, in its present form, is a result of a merger between the original Wells Fargo & Company and Minneapolis-based Norwest Corporation in 1998. While Norwest was the nominal survivor, the merged company took the better-known Wells Fargo name and moved to Wells Fargo's hub in San Francisco. At the same time, its banking subsidiary merged with Wells Fargo's Sioux Falls-based banking subsidiary. Wells Fargo became a coast-to-coast bank with the 2008 acquisition of Charlotte-based Wachovia.

Warburg Pincus

Warburg Pincus

Warburg Pincus LLC is a global private equity firm, headquartered in New York City, with offices in the United States, Europe, Brazil, China, Southeast Asia and India. Warburg has been a private equity investor since 1966. The firm currently has over $80 billion in assets under management and invests in a range of sectors including retail, industrial manufacturing, energy, financial services, health care, technology, media, and real estate. Warburg Pincus is a growth investor. Warburg Pincus has raised 21 private equity funds which have invested over $100 billion in over 1,000 companies in 40 countries.

Title IV

Title IV

Title IV of the Higher Education Act of 1965 (HEA) covers the administration of the United States federal student financial aid programs.

Tom Harkin

Tom Harkin

Thomas Richard Harkin is an American lawyer, author, and politician who served as a United States senator from Iowa from 1985 to 2015. A member of the Democratic Party, he previously was the U.S. representative for Iowa's 5th congressional district from 1975 to 1985. He is the longest-serving senator to spend his whole tenure as a state's junior senator.

Rise of OPMs and a surge in edtech

In 2007, Academic Partnerships was founded, and a year later, 2U. In 2010, Noodle was created. By 2018 there were approximately 30 OPMs and experts were reporting that a shakeout would occur.[80]

In January 2021, in anticipation of an edtech bubble, Class Acceleration Corporation (CLAS.U), a special-purpose acquisition company (SPAC) was formed, raising $225 million in its initial public offering.[81] In March 2021, Coursera, became a publicly traded corporation.[82] In June 2021 2U announced they would be acquiring edX, "to create an entity that would reach 50 million learners and serve most of the best universities in the United States and the world."[83]Guild Education, an intermediary in employee education benefits, also grew in value, from $1 billion in 2019 to $3.75 billion in 2021, adding Target Corporation to its list of large corporate clients.[84] In September 2021, Anthology, a higher education administrative software firm, announced that would merge with Blackboard.[85]

In 2023, the US Department of Education announced that OPMs would be subject to greater oversight, to include audits. Higher education institutions would be required to report details about their agreements with OPMs by May 1, 2023.[86]

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Academic Partnerships

Academic Partnerships

Academic Partnerships (AP) is a major for-profit online program manager (OPM) owned by Vistria Group, a private equity firm. Established in 2007 by entrepreneur Randy Best, it claims to serve more than 50 colleges and universities, providing technology, marketing services, and student support services to mid-level brands. Because of its early start as an OPM, it has been considered "a pioneer" in the business. APs clients, which are mostly regional public universities, are lower in price than elite colleges, but face significant financial and enrollment challenges. According to Academic Partnerships, the company has served 270,000 students and converted more than 4000 campus-based classes to online courses.

2U (company)

2U (company)

2U, Inc. is an American educational technology company that contracts with non-profit colleges and universities to build, deliver and support online degree and non-degree programs. The company is an online program manager (OPM), supplying its client institutions with a cloud-based software-as-a-service platform, coursework design, infrastructure support, and capital.

Special-purpose acquisition company

Special-purpose acquisition company

A special purpose acquisition company, also known as a "blank check company", is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process and the associated regulations thereof. According to the U.S. Securities and Exchange Commission (SEC), SPACs are created specifically to pool funds to finance a future merger or acquisition opportunity within a set timeframe; these opportunities usually have yet to be identified while raising funds.

Coursera

Coursera

Coursera Inc. is a U.S.-based massive open online course provider founded in 2012 by Stanford University computer science professors Andrew Ng and Daphne Koller. Coursera works with universities and other organizations to offer online courses, certifications, and degrees in a variety of subjects. In 2021 it was estimated that about 150 universities offered more than 4,000 courses through Coursera.

EdX

EdX

edX is an American massive open online course (MOOC) provider created by Harvard and MIT. It hosts online university-level courses in a wide range of disciplines to a worldwide student body, including some courses at no charge. It also conducts research into learning based on how people use its platform. edX runs on the free Open edX open-source software platform. 2U is the parent company, with edX operating as its global online learning platform and primary brand for products and services.

Guild Education

Guild Education

Guild Education is a private company headquartered in Denver, Colorado that is employed by Fortune 1000 companies to manage their education assistance benefits. Guild works for corporate employer clients to facilitate direct payment for courses to education provider clients and offers marketing services to the education provider clients.

Target Corporation

Target Corporation

Target Corporation is an American retail corporation headquartered in Minneapolis, Minnesota. It is the eighth largest retailer in the United States, and a component of the S&P 500 Index. The company is one of the largest American-owned private employers in the United States.

For-profit colleges

For-profit colleges, also known as proprietary colleges, are post-secondary schools that survive by making a profit for their investors. For-profit colleges have frequently offered career-oriented curricula including culinary arts, business and technology (including coding bootcamps), and health care. These institutions have a long history in the US, and grew rapidly from 1972 to 2009, fueled by government funding and corporate investment.[87] Approximately 40 percent of all for-profit college campuses have closed since 2010.[77] Concerns about for-profit school owners converting to nonprofit while retaining profit-making roles led lawmakers to request an examination of the situation by the U.S. Government Accountability Office.[88] Two states, Maryland and California, have enacted laws to review the legitimacy of nonprofit claims by colleges.[10]

While for-profit colleges were facing greater scrutiny, online program managers (OPMs) were being established. Academic Partnerships was formed in 2007, 2U in 2008, Noodle Partners in 2010.

In 2013 Harvard Business School Professor Clayton Christensen, creator of the Theory of Disruptive Innovation. "predicted that the bottom 25 percent of every college and university tier would disappear or merge within the next decade."[89]

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For-profit colleges in the United States

For-profit colleges in the United States

For-profit colleges, also known as proprietary colleges, are post-secondary schools that rely on investors, and survive by making a profit. They include for-profit vocational and technical schools, career colleges, and predominantly online universities. For-profit colleges have frequently offered career-oriented curricula including culinary arts, business and technology, and health care. These institutions have a long history in the US, and grew rapidly from 1972 to 2009. The growth of for-profit education has been fueled by government funding as well as corporate investment, including private equity.

Cooking school

Cooking school

A cooking school is an institution devoted to education in the art and science of cooking and food preparation. There are many different types of cooking schools around the world, some devoted to training professional chefs, others aimed at amateur enthusiasts, with some being a mixture of the two. Amateur cooking schools are often intertwined with culinary tourism in many countries. Programs can vary from half a day to several years. Some programs lead to an academic degree or a recognized vocational qualification, while others do not. Many programs include practical experience in the kitchen of a restaurant attached to the school or a period of work experience in a privately owned restaurant.

Coding bootcamp

Coding bootcamp

Coding bootcamps are intensive programs of software development. They first appeared in 2011.

Government Accountability Office

Government Accountability Office

The U.S. Government Accountability Office (GAO), formerly the Government Office of Accountability, is a legislative branch government agency that provides auditing, evaluative, and investigative services for the United States Congress. It is the supreme audit institution of the federal government of the United States. It identifies its core "mission values" as: accountability, integrity, and reliability. It is also known as the "congressional watchdog".

Clayton Christensen

Clayton Christensen

Clayton Magleby Christensen was an American academic and business consultant who developed the theory of "disruptive innovation", which has been called the most influential business idea of the early 21st century. Christensen introduced "disruption" in his 1997 book The Innovator's Dilemma, and it led The Economist to term him "the most influential management thinker of his time." He served as the Kim B. Clark Professor of Business Administration at the Harvard Business School (HBS), and was also a leader and writer in the Church of Jesus Christ of Latter-day Saints. One of the founders of the Jobs to Be Done development methodology.

For-profit online program managers (OPMs)

Online program managers (OPMs) play a significant role in online education.[90][22] However,the industry has felt a great deal of economic pressure.[91] The largest OPM's are: 2U, Academic Partnerships, Bisk Education, Pearson Learning and Wiley Education Solutions.[92] In June 2018, Inside Higher Education published "A Tipping Point for OPM?" which stated that most experts thought a "shakeout" would be occurring among Online Program Managers.[22] In July 2019, 2U shares dropped more than 50 percent when it lowered its growth expectations.[93] According to a Century Foundation analysis of 70 universities, OPMs create an increasing risk to students and public education. According to the report "this growing private control—which is often hidden from public view—is jeopardizing the quality of online programs, stripping control from colleges and universities, and putting students at risk of predatory behavior and abuse at the hands of for-profit companies."[94]

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Education assistance and employee tuition discount programs

Companies can recruit and retain employees by offering them education assistance and employee tuition discounts.[95]Guild Education is a for-profit company that works with employers such as Walmart and Disney to offer tuition assistance from several colleges, including University of Arizona Global (formerly Ashford University), Purdue University Global (formerly Kaplan University), and University of Florida.

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Guild Education

Guild Education

Guild Education is a private company headquartered in Denver, Colorado that is employed by Fortune 1000 companies to manage their education assistance benefits. Guild works for corporate employer clients to facilitate direct payment for courses to education provider clients and offers marketing services to the education provider clients.

Walmart

Walmart

Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores in the United States, headquartered in Bentonville, Arkansas. The company was founded by brothers Sam and James "Bud" Walton in nearby Rogers, Arkansas in 1962 and incorporated under Delaware General Corporation Law on October 31, 1969. It also owns and operates Sam's Club retail warehouses.

Kaplan University

Kaplan University

Kaplan University (KU) was a private online for-profit university owned by Kaplan, Inc., a subsidiary of Graham Holdings Company. It was predominantly a distance learning institution, maintaining 14 ground locations across the United States. The university was named in honor of Stanley H. Kaplan, who founded Kaplan Test Prep. It was regionally accredited by the Higher Learning Commission, one of seven major accrediting bodies in the U.S., but some programs did not have the field-specific accreditation needed for graduates to obtain certification.

University of Florida

University of Florida

The University of Florida is a public land-grant research university in Gainesville, Florida. It is a senior member of the State University System of Florida, traces its origins to 1853, and has operated continuously on its Gainesville campus since September 1906.

Private loans and student loan servicers

While most student loans are owned by the federal government, for-profit student loan servicers collect a large amount of the student loan debt. Navient, Wells Fargo, and Discover Financial Services have been among the largest student loan lenders. FFEL loans and private loans are packaged, rated by rating agencies, and sold off as Student Loan Asset-Backed Securities (SLABS). For-profit student loan servicers have included Maximus Inc., Sallie Mae, Navient, Great Lakes Borrowers and Nelnet.[96] In 2020, there was a resurgence in private student loans.[97]

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Maximus Inc.

Maximus Inc.

Maximus Inc. is an American government services company, with global operations in countries including the United States, Australia, Canada, and the United Kingdom. The company contracts with government agencies to provide services to manage and administer government-sponsored programs. Maximus provides administration and other services for Medicaid, Medicare, health care reform, and welfare-to-work, among other government programs. The company is based in Tysons, Virginia, has 34,300 employees and a reported annual revenue of $3.46 billion in fiscal year 2020.

Sallie Mae

Sallie Mae

SLM Corporation is a publicly traded U.S. corporation that provides consumer banking. Its nature has changed dramatically since it was set up in the early 1970s. At first, it was a government entity that serviced federal education loans. It then became private and started offering private student loans, although at one point it had a contract to service federal loans.

Navient

Navient

Navient Corporation is an American student loan servicer based in Wilmington, Delaware. Managing nearly $300 billion in student loans for more than 12 million debtors, the company was formed in 2014 by the split of Sallie Mae into two distinct entities: Sallie Mae Bank and Navient. Navient employs 4,330 people at offices across the U.S. As of 2018, Navient services 25% of student loans in the United States.

Nelnet

Nelnet

Nelnet, Inc., is a United States-based conglomerate that deals in the administration and repayment of student loans and education financial services. The company is headquartered in Lincoln, Nebraska.

Sources of funding & revenue

The main sources of initial capital for large proprietary colleges and online program managers are institutional investors: international banks, hedge funds, institutional retirement funds, and state retirement funds.[45][98][99] Some smaller schools are family owned businesses. At elite universities, donors may serve as significant sources. Stanford University and Johns Hopkins University were built with funds from their founders.

For-profit institutions also obtain funds through student private loans, corporate loans, and the selling of assets.[100][101]

GI Bill funds, Department of Defense Tuition Assistance and MyCAA

The for-profit education industry also receives billions of dollars through VA benefits also known as the GI Bill.[102] According to a CBS News report in 2017, 40 percent of all GI Bill funds went to for-profit colleges.[103] For-profit colleges receive money for servicemembers and their spouses attending college while still in the military.[104] In fiscal year 2018, for-profit colleges received $181 million or 38 percent of all DOD TA funds. For-profit schools also receive money from DOD for education of military spouses. The program is known as MyCAA.[105][106]

Bootcamps

Coding bootcamps and other tech boot camps are a popular route for acquiring technical skills quickly. However, there may already be an oversupply of graduates and some coding bootcamps have already closed.[107][108][109][110] Some privately run bootcamps were acquired by for-profit educational companies. In 2014, Kaplan acquired Dev Bootcamp.[111] In 2016, Capella University acquired Hackbright Academy, a coding bootcamp for women, for $18 million.[112] In October 2020, online program manager 2U announced that it had established more than 50 additional bootcamps.[113]

Loans, bonds, and sale of assets

For-profit corporations also obtain cash flow through student private loans, corporate loans, and the selling of assets.[114][115] Colleges and universities may generate capital for large projects like sports stadiums, dormitories, and other infrastructure by issuing bonds that are created, rated, and sold to investors.[116][117]

Research parks

Research parks and medical facilities make up a great amount of revenue for brand name US Universities. There are more than 130 research parks in the US. These parks do research for private companies and federal agencies and they patent pharmaceuticals and other scientific products.[118]

Land holdings

US universities, especially elite schools, hold large amounts of land, giving them an enormous amount of local political power.[119]

State and county funds

Community colleges receive funds from counties and states. States partially fund state colleges and universities. State flagship universities often rely on more diverse revenue streams.

Credit rating agencies

For-profit credit rating agencies evaluate the credit worthiness of higher education institutions. Credit rating is an essential element for obtaining capital for large infrastructure projects. The rating agencies also evaluate Student Loan Asset-Backed Securities. The three major credit rating agencies are Moody's, Standard and Poor's, and Fitch Ratings.

Recruiting, advertising, and lead generators

The for-profit college industry has spent billions of dollars on student recruiting, advertising, and buying leads for recruitment.[120][121] The colleges' marketing departments rely heavily on Lead Generators, which are companies that find potential students ("leads") and provide their personal information and preferences to for-profit college.[122][123][124]

In 2016, Noodle CEO John Katzman estimated that about $10 billion per year is being spent on higher education marketing and advertising.[125] For-profit colleges use lead generation companies to target potential students and to take their personal information.[126][127] However, as competition has heated up in U.S. higher education, traditional schools have also employed them.[128] Lead generators use multiple strategies to find and enroll students. There are hundreds of sites on the internet that gather information for schools.[129] The most notable lead generator is Education Dynamics. In September 2020, Education Dynamics purchased QuinStreet's higher education vertical.[130]

Politics and political lobbying

Politics and lobbying play a significant part in the history of U.S. for-profit school growth.[131][17] The for-profit education industry has spent more than $40 million on lobbying from 2007 to 2012.[132] and $36 million since 2010.[133] For-profit education lobbying grew from $83,000 in 1990 to approximately $4.5 million in its peak year of 2012.[134] In 2019, colleges and universities spent almost $75 million in federal lobbies.[135] The most significant industry lobby is Career Education Colleges and Universities (CECU), previously known as The Association of Private Sector Colleges and Universities (ASPCU). Before 2010, the organization was known as the Career College Association.[136] The Cato Institute's Center for Educational Freedom also supports for-profit higher education.[137][138]

Government scrutiny, criminal and civil investigations

According to A.J. Angulo, for-profit higher education in the U.S. has been the subject of government scrutiny from the mid-1980s to the 2010s.[17]

In August 2010, the GAO reported on an investigation that randomly sampled student-recruiting practices of several for-profit institutions. Investigators posing as prospective students documented deceptive recruiting practices, including misleading information about costs and potential future earnings. They also reported that some recruiters urged them to provide false information on applications for financial aid.[139] Out of the fifteen sampled, all had engaged in deceptive practices, improperly promising unrealistically high pay for graduating students, and four engaged in outright fraud, per a GAO report released at a hearing of the Health, Education, Labor and Pensions Committee on August 4, 2010.[140]

In 2014, a criminal investigation of Corinthian Colleges was initiated.[141] Until 2015, The U.S. Attorney General and at least eleven states maintained an $11 billion lawsuit against Education Management Corporation.[142] The U.S. Consumer Financial Protection Bureau also has a suit against ITT Educational Services, parent company of ITT Tech.[143][144] In 2016, Alejandro Amor, the founder of FastTrain, was sentenced to eight years in federal prison for fraud.[145]

Debate over federal public policy regarding for profit higher education has been an ongoing issue since the late 1960s.[146] In 2015, the Obama administration introduced numerous legislation aimed at allowing students to make informed decisions about attending colleges and universities that were within their budget.[147] The American Graduation Initiative was legislation introduced by the Obama administration to increased academic progress requirements for financial aid to ensure that students finish their education.[147] The administration also introduced America's College Promise (ACP) which was intended to support the American Graduation Initiative, make higher education more accessible and build the economy.[147][148] The ACP was intended to spend $61 billion to make the first 2 years of community college free for students.[147] This legislation was not passed during the Obama administration but has been re-introduced to the Senate in 2021 under the Biden Administration.[149]

The U.S. Department of Education (DoED) proposed "gainful employment regulations" would provide more transparency and accountability to institutions that offer professional and technical training. According to DoED, this regulation is an attempt to "protect borrowers and taxpayers."[150] In his 2015 budget proposal, President Obama recommended greater regulation of for-profit education, including a closure of the loophole that exempted GI Bill money from being used in the 90-10 formula.[151]

The Trump administration revoked regulations aimed at protecting students from predatory practices by for-profit colleges, reversing the rules adopted during the Obama administration.[152][153][154] In 2019, Trump's Secretary of Education Betsy DeVos issued a complete final repeal of the 2014 "gainful employment rule" (a regulation that never came into effect, but would have cut federal funding from low-quality colleges whose graduates consistently had high debt compared to their incomes). The repeal was effective July 1, 2020.[155][156] DeVos was also a vocal opponent of "borrower defense to repayment" applications—claims from recipients of federal student loan who sought loan forgiveness on the grounds that they were defrauded or misled by their colleges.[157][158] DeVos derided the program as a "free money" giveaway to borrowers; during her tenure as secretary of education, Department staff were given only about 12 minutes to process each application, some of which ran to hundreds of pages.[158]

In August 2017, DeVos instituted policies to loosen regulations on for-profit colleges.[64] In September 2017, the Trump Administration proposed to remove conflict of interest rules between VA officials and for-profit colleges.[159] In March 2018, the House Subcommittee on Labor, Health and Human Services, Education and Related Agencies began reviewing problems related to for-profit colleges and student loan debt.[160] Lobbyists for the for-profit higher education industry have taken several steps to stop regulation and to fight against transparency and accountability.[161] They have also supported at least two lawsuits to squash gainful employment regulations.[162][163][164]

Discover more about Government scrutiny, criminal and civil investigations related topics

Fraud

Fraud

In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law or criminal law, or it may cause no loss of money, property, or legal right but still be an element of another civil or criminal wrong. The purpose of fraud may be monetary gain or other benefits, for example by obtaining a passport, travel document, or driver's license, or mortgage fraud, where the perpetrator may attempt to qualify for a mortgage by way of false statements.

Corinthian Colleges

Corinthian Colleges

Corinthian Colleges, Inc. (CCi) was a for-profit post-secondary education company in North America. Its subsidiaries offered career-oriented diploma and degree programs in health care, business, criminal justice, transportation technology and maintenance, construction trades, and information technology. A remnant of the schools was owned by ECMC under the Altierus Career College brand until the last three campuses were closed in 2022.

Education Management Corporation

Education Management Corporation

Education Management Corporation (EDMC) was a Pittsburgh, Pennsylvania-based operator of for-profit post-secondary educational institutions in the United States and Canada. The company was founded in 1962. At its peak in 2011, Education Management Corporation operated 110 schools through its higher education divisions: Argosy University, The Art Institutes, Brown Mackie College, and South University, and enrolled 158,300 students.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is an agency of the United States government responsible for consumer protection in the financial sector. CFPB's jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating in the United States. Since its founding, the CFPB has used technology tools to monitor how financial entities used social media and algorithms to target consumers.

America's College Promise

America's College Promise

America's College Promise was a proposal by the Barack Obama administration to offer all students two free years of community college tuition. It was based on the Tennessee Promise, a similar program for the state of Tennessee. State level programs, like the Tennessee Promise, have faced critique for their ability to fill tangible educational benefits. The bill was referred to committee in July 2015, where it languished. Later that year, Obama announced the College Promise Advisory Board, an independent coalition of American leaders in community college, political, foundation, and business sectors to advocate for the proposal. A criticism of the plan is its lack of focus on existing student loan debt. Senator Tammy Baldwin and Representative Andy Levin re-introduced the bill in July 2019.

Betsy DeVos

Betsy DeVos

Elisabeth Dee DeVos is an American politician, philanthropist, and former government official who served as the 11th United States secretary of education from 2017 to 2021. DeVos is known for her conservative political activism, and particularly her support for school choice, school voucher programs, and charter schools. She was Republican national committeewoman for Michigan from 1992 to 1997 and served as chair of the Michigan Republican Party from 1996 to 2000, and again from 2003 to 2005. She has advocated for the Detroit charter school system and she is a former member of the board of the Foundation for Excellence in Education. She has served as chair of the board of the Alliance for School Choice and the Acton Institute and headed the All Children Matter PAC.

Source: "For-profit higher education in the United States", Wikipedia, Wikimedia Foundation, (2023, March 22nd), https://en.wikipedia.org/wiki/For-profit_higher_education_in_the_United_States.

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