> Skip to content
FEATURED:
  • Student Success Resource Center
Sign In
  • News
  • Advice
  • The Review
  • Data
  • Current Issue
  • Virtual Events
  • Store
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
  • Jobs
    • Find a Job
    • Post a Job
    • Career Resources
    • Find a Job
    • Post a Job
    • Career Resources
Sign In
  • News
  • Advice
  • The Review
  • Data
  • Current Issue
  • Virtual Events
  • Store
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
  • Jobs
    • Find a Job
    • Post a Job
    • Career Resources
    • Find a Job
    • Post a Job
    • Career Resources
  • News
  • Advice
  • The Review
  • Data
  • Current Issue
  • Virtual Events
  • Store
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
    • Featured Products
    • Reports
    • Data
    • Collections
    • Back Issues
  • Jobs
    • Find a Job
    • Post a Job
    • Career Resources
    • Find a Job
    • Post a Job
    • Career Resources
Sign In
ADVERTISEMENT
For-Profit Colleges
  • Twitter
  • LinkedIn
  • Show more sharing options
Share
  • Twitter
  • LinkedIn
  • Facebook
  • Email
  • Copy Link URLCopied!
  • Print

For-Profit Colleges May Be Down, but Don’t Count Them Out

By  Goldie Blumenstyk
January 6, 2016

The Wall Street swagger of for-profit college companies — so visible just five years ago — looks a lot more like a limp at the dawn of 2016.

At the height of their growth, in 2010, for-profit colleges enrolled more than one in 12 students at degree-granting institutions in the United States. The colleges still make up a significant part of the education landscape, enrolling about 6.5 percent of all students as of the spring of 2015, according to the National Student Clearinghouse. But enrollment at those colleges has fallen by 26 percent since the high point, a far greater decrease than the 9-percent decline in overall
postsecondary enrollment.

We’re sorry. Something went wrong.

We are unable to fully display the content of this page.

The most likely cause of this is a content blocker on your computer or network. Please make sure your computer, VPN, or network allows javascript and allows content to be delivered from c950.chronicle.com and chronicle.blueconic.net.

Once javascript and access to those URLs are allowed, please refresh this page. You may then be asked to log in, create an account if you don't already have one, or subscribe.

If you continue to experience issues, contact us at 202-466-1032 or help@chronicle.com

The Wall Street swagger of for-profit college companies — so visible just five years ago — looks a lot more like a limp at the dawn of 2016.

At the height of their growth, in 2010, for-profit colleges enrolled more than one in 12 students at degree-granting institutions in the United States. The colleges still make up a significant part of the education landscape, enrolling about 6.5 percent of all students as of the spring of 2015, according to the National Student Clearinghouse. But enrollment at those colleges has fallen by 26 percent since the high point, a far greater decrease than the 9-percent decline in overall
postsecondary enrollment.

Not all for-profit colleges are hurting, even among those owned by publicly traded companies. Enrollment has been consistently robust at Grand Canyon University over the past five years, thanks in large part to its Christian-education focus, and the numbers have recently rebounded at Capella University as well. When it comes to market value, the trend is even more consistent — and downward. With the exception of Grand Canyon, many of the companies have seen their value drop, often drastically, as enrollments have fallen and scrutiny has increased. In 2009, 10 of the biggest publicly traded companies were collectively worth about $30-billion. Today, with Corinthian Colleges bankrupt, Education Management Corporation trading for pennies, and even the once-mighty Apollo Education Group valued at less than one-tenth of its 2009 figure, the estimate on that collection of companies is closer to $6-billion.

Apollo’s decline, from $10 billion in 2009 to under $800 million today, is mirrored in the steep drop in enrollment at its flagship property, the University of Phoenix, In 2009 Phoenix’s enrollment topped out at 455,600, By 2015 it was down to about 216,000, and company officials say they expect it to get even smaller, part of a broad overhaul that includes closing brick-and-mortar campuses, offering fewer start dates, retiring several associate-degree programs, and putting in place admissions criteria. The company is also facing scrutiny from several federal regulators, including the Federal Trade Commission. The Department of Defense put the institution on probation in October, preventing it from enrolling active-duty servicemembers using their federal Tuition Assistance benefits.

ADVERTISEMENT

The new “gainful-employment” rule, which could eliminate federal student aid for degree programs that leave students with too much debt relative to the incomes they can earn with those degrees, is also having a major effect on the sector. Several colleges have recently cited the regulation as a reason for closing, and many others are eliminating or altering their pricier programs to comply with it.

“It really is a time of adaptation,” says Constance Iloh, who is writing a book on proprietary colleges. That’s true not only for the for-profit colleges, which are responding to increasing regulation and greater scrutiny, but also for many other kinds of institutions in higher education.

Ms. Iloh, an incoming assistant professor at the University of California at Irvine, says that the sector’s many enrollment and legal challenges don’t necessarily signal its demise. “This is a sector that has many lives,” she says. “it’s way too early to close the story.”

As the ecosystem of higher education expands, she says it may also be time to think past old labels. “The questions certainly need to evolve beyond the issue of ‘nonprofit’ and ‘for-profit’ to looking at sets of behaviors that might indicate institutions’ goals, values, and actions,” she says. Existing regulatory and oversight systems may not yet be suitable for this new environment, Ms. Iloh adds. But ultimately, “what’s going to drive this moving toward a more nuanced discussion is a sincere focus on students.”

Where does that story stand right now?

ADVERTISEMENT

Political and Legal Scrutiny Continues as College Companies Shrink

Phoenix’s plan to downsize itself and impose more-restrictive admissions requirements comes in the face of falling enrollments. Other for-profit colleges facing enrollment declines, including American Public University System, have also announced plans to tailor their recruiting toward students more likely to succeed.

Many of the companies are shadows of their former selves. Five years ago, Career Education Corporation enrolled more than 100,000 students. In May it announced it would be closing down several of its career-school divisions by the end of 2016 and trying to sell off another, its culinary brand, leaving it with two institutions that collectively enrolled fewer than 34,000. (Last month it gave up on trying to sell Le Cordon Bleu and announced it would close it down instead.) Another once-prominent college company, the privately held Westwood College, announced in November that it was no longer enrolling new students.

Also in November, what was once one of the biggest of the companies (before it closed down 15 of its Art Institutes campuses), Education Management Corporation, ended several federal and state lawsuits over its recruitment practices with a $95.5-million settlement. But several of the college companies continue to face investigations, most notably ITT Educational Services, which is being sued by the U.S. Securities and Exchange Commission and the Consumer Financial Protection Bureau. The Federal Trade Commission is also investigating Phoenix, Career Education, and DeVry Education Group.

Yet while the college companies face continued scrutiny and enrollment challenges in America, several of them, including DeVry, are expanding overseas, DeVry says it now makes more than a quarter of its revenue from its campuses outside the United States. In late 2015 the parent company of the University of Phoenix finalized its purchase of a German college focused on management and hospitality. And Laureate Education, which has always been heavily dependent on its overseas operations, recently filed documents indicating its plans to go back onto the market as a public company. It is doing so after eight years as a private venture, during which time it expanded from 24 institutions with more than 240,000 students to a network of 88 institutions across 28 countries enrolling more than a million students.

ADVERTISEMENT

A Smaller Trade Association

The collapse of Corinthian Colleges last year and major cutbacks at other big-profit college companies have left a big dent at the Association of Private Sector Colleges and Universities, the industry’s main trade association. Following the departures last year of Education Management and ITT, Kaplan and DeVry left the association as of July 1 and Career Education Corporation quit in September.

The association assesses dues based on the tuition revenues of its member colleges, so those departures, coupled with enrollment declines at other institutions, forced it to reduce its budget for annual operations by nearly half, to about $5.5 million. The organization has also reduced its staffing from more than 20 employees 16 months ago to about a dozen today.

When he took over as president in 2012, Steve Gunderson said he was considering a campaign to strengthen the association’s political action committee. Today, however, he says the association will primarily defer to PACs created by member colleges. He said the association may find a new name to better reflect its colleges’ career-training mission.

The association also suffered a legal blow last year when a federal judge dismissed its challenge to the gainful-employment rule. The organization has appealed that court ruling, and oral arguments are scheduled for this month.

ADVERTISEMENT

For-Profit Conversions Pick Up — And Come Under the Spotlight

Last year’s conversion of Herzing University from for-profit to nonprofit and the continuing question of whether the larger, publicly traded Grand Canyon University can do the same have brought attention to such transactions. They’ve also prompted some public criticism.

The conversions allow the colleges to avoid income taxes and regulations like the gainful-employment rule, but an October report from the Century Foundation spotlighted questionable aspects of Herzing’s and three other recent conversions. It also argued that for-profits-turned-nonprofits now occupy “a dangerous regulatory blind spot.” Colleges making these conversions say they’re doing so, in part, out of concern that students and others hold negative feelings about for-profit colleges.

The 50-plus Everest and WyoTech campuses formerly owned by Corinthian now belong to a nonprofit venture called Zenith Education Group, a subsidiary of the loan-servicing company ECMC.

At the same time, a few existing for-profit college companies — Minnesota-based Rasmussen College and, just recently, the global giant Laureate — have reincorporated themselves as “benefit corporations.” Under that structure, the companies are protected from liability to shareholders if the companies pursue benefits to the public at the expense of some profit.

ADVERTISEMENT

Goldie Blumenstyk writes about the intersection of business and higher education. Check out www.goldieblumenstyk.com for information on her new book about the higher-education crisis; follow her on Twitter @GoldieStandard; or email her at goldie@chronicle.com.


Questions or concerns about this article? Email us or submit a letter to the editor.

We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
Goldie Blumenstyk
The veteran reporter Goldie Blumenstyk writes a weekly newsletter, The Edge, about the people, ideas, and trends changing higher education. Find her on Twitter @GoldieStandard. She is also the author of the bestselling book American Higher Education in Crisis? What Everyone Needs to Know.
ADVERTISEMENT
ADVERTISEMENT
  • Explore
    • Get Newsletters
    • Letters
    • Free Reports and Guides
    • Professional Development
    • Virtual Events
    • Chronicle Store
    • Find a Job
    Explore
    • Get Newsletters
    • Letters
    • Free Reports and Guides
    • Professional Development
    • Virtual Events
    • Chronicle Store
    • Find a Job
  • The Chronicle
    • About Us
    • DEI Commitment Statement
    • Write for Us
    • Talk to Us
    • Work at The Chronicle
    • User Agreement
    • Privacy Policy
    • California Privacy Policy
    • Site Map
    • Accessibility Statement
    The Chronicle
    • About Us
    • DEI Commitment Statement
    • Write for Us
    • Talk to Us
    • Work at The Chronicle
    • User Agreement
    • Privacy Policy
    • California Privacy Policy
    • Site Map
    • Accessibility Statement
  • Customer Assistance
    • Contact Us
    • Advertise With Us
    • Post a Job
    • Advertising Terms and Conditions
    • Reprints & Permissions
    • Do Not Sell My Personal Information
    Customer Assistance
    • Contact Us
    • Advertise With Us
    • Post a Job
    • Advertising Terms and Conditions
    • Reprints & Permissions
    • Do Not Sell My Personal Information
  • Subscribe
    • Individual Subscriptions
    • Institutional Subscriptions
    • Subscription & Account FAQ
    • Manage Newsletters
    • Manage Your Account
    Subscribe
    • Individual Subscriptions
    • Institutional Subscriptions
    • Subscription & Account FAQ
    • Manage Newsletters
    • Manage Your Account
1255 23rd Street, N.W. Washington, D.C. 20037
© 2023 The Chronicle of Higher Education
  • twitter
  • instagram
  • youtube
  • facebook
  • linkedin