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, and more recently with online program managers, but commercialization has been part of US higher education for centuries. Privatization of public institutions has been increasing since at least the 1980s.
History For-profit colleges in the U.S. have their origins in the Colonial Era. According to AJ Angulo, 19th century for-profit colleges offering practical skills expanded across the United States, meeting a demand for practical job training. A student could take any courses, and they generally did not offer degrees or dormitories or extra-curricular activities. Typically they hired local businessmen to give occasional courses. 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. The Bryant & Stratton Chain School grew to about 50 schools by 1864. After graduating from high school in 1901 Harry S. Truman decided not to attend the state university like his friends. He was more interested in continuing his advanced piano lessons in Kansas City. He also took three occasional courses at Spalding's Commercial College, including typing, shorthand, and accounting. These proved useful in getting an office job with a major bank, and later when he kept the books on his family farm.Alonzo L. Hamby, Man of the People: A Life of Harry S. Truman (Oxford UP, 1995) pp. 17–19. The decline of proprietary colleges was a result of the Smith-Hughes Act of 1917, also known as the National Vocational Education Act, which funded free 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.
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." 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. 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).
Growth of for-profit colleges (1945–2010) 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. For-profit colleges grew again 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.
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."
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. 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.
Privatization, regulation, and deregulation (1980–present) Since the 1980s, public universities, particularly state flagship universities have increasingly relied on for-profit revenue sources and privatization.
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.
As for-profit colleges face declining enrollment, there has been a blurring between for-profit and non-profit institutions. For-profit Online Program Managers (OPMs) serving public and private non-profit schools include 2U, Academic Partnerships, Bisk Education, Noodle Partners, Pearson Education, and Wiley. In 2018, there were more than two dozen OPMs. Human capital contracts, also known as Income Share Agreements (ISAs) may also be seen as for-profit vehicles.
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. Approximately 40 percent of all for-profit college campuses have closed since 2010. 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. Two states, Maryland and California, enacted laws to review the legitimacy of nonprofit claims by colleges.
EdTech and for-profit online program managers (OPMs)
Online program managers (OPMs) play a significant role in online education, serving many colleges and universities, including elite schools. However, the industry has felt a great deal of economic pressure. The largest OPM's are: 2U, Academic Partnerships, Bisk Education, Pearson Learning and Wiley Education Solutions.
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.
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. In July 2019, 2U shares dropped more than 50 percent when it lowered its growth expectations. 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 controlwhich is often hidden from public viewis 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."
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. In March 2021, Coursera, became a publicly traded corporation. 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."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. In September 2021, Anthology, a higher education administrative software firm, announced that would merge with Blackboard.
In 2022, 2U acquired edX, a platform for massive open online courses.
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. The same year, Edtech expert Phil Hill said that the OPM model is now "on life support."
Privatization, affordability, and access of services at state flagship universities
Since the 1980s, public universities, particularly state flagship universities have increasingly relied on for-profit revenue sources and privatization.
Public colleges and universities have 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.
Today, most state flagship universities are not affordable for low- and moderate-income families as these schools cater more toward affluent students. 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. 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. In 2013, the average cost of tuition was 3.5 times that of a median households annual income.
In 2023, the Chronicle of Higher Education found that 75 percent of the university officials they surveyed said private-public partnerships were increasing.
Federal oversight