for-profit universities

The stocks of for-profit universities were incredibly hot in the midst of the market meltdown from the Internet bubble of 1998-early 2000.  That’s partly because they had almost nothing to do with Technology, Media or Telecom.  It was also because they were experiencing a period of strong revenue and profit growth.  The story was that these colleges were: accredited; cheaper than traditional schools; the online instruction they offered was more flexible than bricks-and-mortar-based teaching; students could get a degree in a relevant area while still working.  To top everything else, the for-profits made money, and were piling up income gains at an accelerating rate.

It’s been mostly all downhill since then, however.

How so?

–traditional schools have responded with job-relevant, online course/degree offerings of their own

At the same time, detractors have pointed out that the for-profits:

–are highly dependent on students taking out government loans to finance their studies

–have insufficient resources devoted to keeping their non-traditional students in school

–as a result, they have unusually high numbers of dropouts, many of whom end up defaulting on their (large) student borrowings

–have sales strategies that target members of the military and low-income students, groups with the weakest defenses against inflated sales claims.


Over the years, regulators’ attempts to rein in for-profit abuses have centered on controlling their access to government-funded student loans, based on graduation rates and repayment histories.  Recently, however, the efforts appear to have been upped several notches.

Officials have called on the federal government to remove the credentials of the Accrediting Council for Independent Colleges and Schools, the body whose seal of approval  confers legitimacy on the for-profits and which, more importantly, is the essential step in securing access to the government’s education loan program.

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