For-Profit Colleges

By Deming, David; Goldin, Claudia et al. | The Future of Children, Spring 2013 | Go to article overview

For-Profit Colleges


Deming, David, Goldin, Claudia, Katz, Lawrence, The Future of Children


During the past fifteen years, youth from minority and disadvantaged backgrounds and those ill-prepared for college increasingly and disproportionately have enrolled in programs at for-profit colleges. These programs promise much, are often open to those who do not meet traditional college-entry requirements, and are largely funded by federal student financial aid, particularly federal grants and loans. We analyze the rapid growth of for-profits, look more closely at the students who enroll in them, and assess their role in providing the skills of tomorrow to the youth of today.

What Are For-Profit Colleges?

For-profit sector institutions are a varied group. The sector contains the largest schools by enrollment in the United States and also some of the smallest. For example, the University of Phoenix Online program enrolled more than 532,000 students during the 2009 academic year, and the largest fifteen institutions, taken together, account for almost 60 percent of for-profit enrollments. (1) Yet, in the fall of 2009, the median enrollment in all for-profit institutions eligible to accept federal student aid under Title IV of the Higher Education Act was just 172 students. (2) For-profit schools, also known as proprietary institutions, offer a wide array of programs, from doctorates to certificates earned in a year or less, in fields ranging from health care and business to information technology and graphic design to cosmetology and cooking.

The for-profit sector has existed for more than a century in the form of "career colleges," proprietary institutions that mostly have offered short courses in applied fields and served local labor markets. Yet, today, for-profit higher education has become, in many people's minds, synonymous with large brand-name institutions that have rapidly expanded their presence in the bachelor's degree and graduate education markets. For-profit chains led by online institutions have experienced phenomenal growth in the past several decades. (3) Enrollment in the for-profit sector has more than tripled since 2000, and large national chains are responsible for nearly 90 percent of this increase. (4) Thus the current incarnation of the for-profit sector is big business; the sector's largest providers are highly profitable, publicly traded corporations. (5)

In the past decade, the federal government has greatly expanded the funding of student aid under Title IV to increase access to postsecondary education. From 2000-01 to 2010-11, real federal expenditures on the Pell Grant program more than tripled from $10 billion to $35 billion (in 2010 dollars) and real Stafford Loan volumes more than doubled from $37 billion to $86 billion. (6) In contrast, from 2000 to 2010, state tax appropriations for higher education increased by only about 5 percent in real terms, with zero real growth since 2007. (7) Thus, the large recent increase in federal higher education spending has coincided with a tightening of state budgets.

In the face of sluggish growth in state funding for public institutions, for-profit colleges have grown rapidly to meet demand and have taken advantage of expanded federal student aid. Proprietary institutions increased their share of the total fall enrollment in Title IV-eligible institutions from about 4 percent in 2000 to nearly 11 percent in 2009. (8) For-profit colleges were responsible for nearly 30 percent of the total growth in postsecondary enrollment and degrees awarded in the first decade of the twenty-first century. (9)

Finely attuned to the marketplace, the for-profits are quick to open new schools, hire faculty, and add programs that train students for jobs in fast-growing areas such as health care and information technology. They provide identical curriculum and teaching practices at multiple locations and at convenient times, and they offer highly structured programs that make timely completion feasible. (10) In principle, such responsiveness to employer and student demand leads to greater innovation and efficiency in the marketplace for higher education. …

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