For-profit colleges trace their origins to the Colonial Era and expanded in the 19th century offering practical skills like penmanship and accounting. Growth accelerated after 1972 when the Higher Education Act was amended to allow for-profit institutions 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 experienced rapid expansion through the 1990s and 2000s, fueled by deregulation, Wall Street investment, and the rise of online education.
For-profit college enrollment peaked in 2009–2010 with approximately 2.43 million students and $32 billion in federal Title IV funding. However, the industry faced significant scrutiny under the Obama administration and subsequent investigations revealed widespread problems including misleading marketing, high student loan default rates (52% 12-year default rate by 2018), and poor employment outcomes. Approximately 40% of for-profit campuses have closed since 2010, with major failures including Corinthian Colleges, ITT Technical Institute, and Education Management Corporation.
For-profit colleges have traditionally offered career-oriented curricula in culinary arts, business, technology, and healthcare. However, research documented significant problems: students were often worse off than if they had not attended college or attended community college instead. Congressional investigations found that 54% of bachelor's degree students and 63% of associate degree students dropped out without completing their programs. Recruitment practices targeted vulnerable populations including low-income students, welfare recipients, and those experiencing grief.
The sector received increased government scrutiny regarding fraud, with 74% of institutional fraud investigations in 2005 involving for-profit colleges. Students at for-profit institutions made up 13% of college enrollment but accounted for 47% of student loan defaults. Private equity involvement was associated with higher costs, less spending on education, higher student debt, and lower graduation rates. By 2017, enrollment had declined 45% to 1.35 million students and revenues fell from $29.6 billion to $19.4 billion.