The future of for-profit education in the US

What is the future of for-profit post-secondary education in the US? Here are some trends:

Inspiring growth
Brazilian Effect: when public higher education cannot keep pace with growing public demand for access and programs, governments often allow FP’s to rush in and help fill the gap, becoming a much larger and sometimes dominant provider. This is the pattern in many developing economies such as Brazil where some 50 percent of student enrollment is in profit-like private institution.” (John A. Douglass).

From 2000 to 2010, the sector grew by some 235 percent in enrollment, increasing its market share from 3 to 9.1 percent of all tertiary enrolled students.

Precipitous decline

New student enrollment declined by more than 30% for Apollo and Kaplan, according to a Chronicle infograph.

Emphasis on marketing/recruiting
15 large, publicly traded for-profit education companies got 86 percent of their revenue from taxpayers and have spent a combined $3.7 billion annually on marketing and recruiting, according to a Senate report 

At the largest for-profit institutions marketing expenses average around 22 percent of revenue, according to BMO 

Lower graduation rates
Almost 2 million students withdrew from large for-profit colleges over a three year period. Among those who enrolled at 10 large chains in 2008-2009, 54 percent had withdrawn by the summer of 2010, according to Harkin’s Senate committee.

New non-profit competition
More recently, for-profit has a new competitor–not-for-profit. Initiatives like edX, MITx and coursera are redefining the expectations of online education. It is still too early to say how behavior of credential-seeking student will change, however, it will certainly be impacted. (Here is the recent New York Times debate)

Increasing regulation
Above all increasing regulation is the bane of for-profit education industry, which is already impacting it’s financials.

What are your thoughts/comments about the growth prospects and future directions of the for-profit higher education?

Dr. Rahul Choudaha

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