For-profit colleges have roots in the Colonial Era and expanded in the 19th century offering practical skills training. Growth accelerated dramatically after 1972 when the Higher Education Act was amended to allow for-profit colleges to receive federal funding including Pell Grants and student loans. From 1974 to 1986, for-profit colleges' share of Pell Grants rose from 7% to 21% despite enrolling only 5% of all higher education students. The industry peaked around 2009 with 2.4 million students and nearly $30 billion in revenues.
For-profit college enrollment peaked in 2009 and experienced major declines by 2011. Under the Obama administration (2009–2017), these institutions faced increased government scrutiny. Significant business failures occurred from 2015 to 2019, including Corinthian Colleges, ITT Technical Institute, and Education Management Corporation. By 2017, enrollment had fallen to 1.3 million students. Approximately 40% of all for-profit college campuses have closed since 2010.
Research documented poor outcomes for for-profit college students compared to non-profit and community college peers. A 2011 National Bureau of Economic Research study found for-profit attendees were more likely to be unemployed, earn less, carry higher debt, and default on loans. The 2012 Harkin Report revealed that while for-profit students comprised 13% of college enrollment, they accounted for 47% of loan defaults. Approximately 54% of bachelor's degree students and 63% of associate degree students dropped out without completing their degrees.
For-profit colleges received $32 billion in federal Title IV funding in 2009–2010, representing over 20% of all federal aid. Major institutional investors including Goldman Sachs, Wells Fargo, hedge funds, and private equity firms capitalized the industry. Critics noted that more than half of for-profits' revenues were spent on marketing or extracted as profits, with less than half spent on instruction. Lead generation companies were employed to target and enroll students, often using aggressive recruitment tactics.