US For-Profit Education is on the Brink

After experiencing a heyday in the late 1990’s and early 2000’s, the for-profit education industry seems to be in trouble. According to an article on news website Buzzfeed, the United States is currently experiencing a wave of school closures, especially private, for-profit institutions.

Much of this is due to tightened federal regulations that require schools participating in federal student loan programs to show that graduates are getting jobs after graduation. This crackdown only applies to for-profit schools, which have been under intense scrutiny following major fraud scandals in recent years. In fact, 366 for-profit institutions ceased operations in 2016, which amounts to a staggering 11% of for-profit schools. Some of these schools, such as ITT Technical Institute, have been around for decades.

Sudden closures such as in the case of ITT can be extremely problematic, as students from nationally accredited institutions may find it difficult to transfer their credits to regionally accredited schools. Many of these students already have significant student loan debt as for-private schools tend to have the highest tuition rates.

The for-profit education industry went through a wave of consolidation as the sector was reaching maturity, and some industry giants have been hit down by the federal crackdown. One example is EDMC, which owns the Art Institutes and Brown Mackie Colleges, which have traditionally been heavily advertised on a daytime television. The company also owns Argosy University, which specializes in professional education. EDMC is attempting to sell off most of its campuses.

The future of the for-profit educational industry is grim indeed. Without student loans, the lifeblood of these schools, there is no way they can be profitable. Although a few schools may survive, most of the institutions which offer degrees in fields with fewer employment options are now faced with the prospect of a business model that just doesn’t work anymore.

August 4, 2017

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