For-Profit Education in the United States

Publication Date: May 2008

Publisher: Center for College Affordability and Productivity

Author(s): Richard Vedder; James Coleman

Research Area: Education

Keywords: For-Profit Education; Higher Education

Type: Report

Coverage: United States

Abstract:

For-profit higher education is not new. In fact, profit motive has played an important role in providing higher education since the Golden Age of Greece, when anyone could open up a private school and teach (Coulson 1999). Competitive for-profit education was particularly prominent in Athens, which led the city to become a beacon of learning (Coulson 1999). For-profit education was all but wiped out during the Middle Ages, but reemerged in the early Renaissance, when private instructors were hired to teach merchants the method of double-entry bookkeeping (Reigner 1959). Since the late fifteenth century, forprofit higher education has continued to develop. During the nineteenth century, well-organized forprofit business schools were founded across America and for-profit education developed into a very important form of higher education (Kinser 2006). Compelled by market forces, for-profit schools sprang up where needed to fill the educational needs of the population.

Starting in the mid-1970s and accelerating through the 1980s and 1990s, for-profit education underwent a renaissance, due in large part to the 1972 reauthorization of the Higher Education Act, which increased the amount of government student aid available to for-profit schools (Kinser 2006; Turner 2006). During this era, the broadened scope of Pell Grants gave rise to an increasing number of for-profit universities offering associates, bachelors, and graduate degrees (Turner 2006). Since 1976, for-profit enrollment has grown at an annualized growth rate of about 11 percent, increasing by a factor of nearly twenty-three. For-profits' market share of higher education has gone from 0.4 percent to nearly 6 percent (U.S. Department of Education, National Center for Education Statistics, 2006a). The robust resurgence of for-profit schools suggests America's nonprofit colleges are failing to meet fully the people's needs. As a result, for-profits are stepping in to meet market demands their highly subsidized counterparts have chronically failed to satisfy. These recent and rapid developments have once again brought for-profit education national visibility.