For-Profit Universities


For-Profit Universities

For-profit colleges and universities are a growing presence in American higher education. The sector accounted for an estimated 13 percent of all U.S. college students in 2009—up from 5 percent in 2001—as well as an outsize share of the federal financial-aid dollars that help students cover the cost of higher education. For instance, nearly 25 percent of Pell Grant funds—need-based awards that the federal government provides to students from low-income families—go to students of for-profit schools.

For-profit colleges and universities are a growing presence in American higher education. The sector accounted for an estimated 13 percent of all U.S. college students in 2009—up from 5 percent in 2001—as well as an outsize share of the federal financial-aid dollars that help students cover the cost of higher education. For instance, nearly 25 percent of Pell Grant funds—need-based awards that the federal government provides to students from low-income families—go to students of for-profit schools.

To their supporters, for-profit institutions—described as such because they do not have tax-exempt status and rely on tuition, stock market investors and other private sources of income—are meeting a need by providing an accessible postsecondary education to nontraditional students. Moreover, supporters say, such schools serve many economically disadvantaged students and working adults whom nonprofit colleges have historically underserved. 

Yet a history of problems in the sector has repeatedly made it a target of government regulators and public interest groups. In recent years, for-profit schools have come under intense criticism for, among other issues, questionable recruitment practices, low completion rates and heavy student debt burdens. Former students of for-profit schools account for nearly half of all student loan defaults.

The debate over for-profit postsecondary schools—which those in the industry prefer to call career, proprietary, or private sector colleges—raises questions about how best to balance access and accountability. Such questions are important at a time when leading voices are calling for many more Americans to earn postsecondary credentials and degrees.

Through news articles, academic studies and other resources, this Topics section  looks at the for-profit college landscape, including federal efforts to address some of the sector’s perceived shortcomings.

Unlike private and public institutions with nonprofit status, for-profits do not receive direct operational funding from state or federal sources. However, students enrolled at proprietary colleges have been permitted to receive federally backed grants and loans since 1972, under Title IV of the reauthorized Higher Education Act of 1965.

A USA Today analysis of college costs showed that 92 percent of students at for-profit colleges took out loans, compared with 60 percent who attend nonprofit private schools and 27 percent who enroll in public schools. According to The Chronicle of Education, annual tuition for full-time undergraduates at four-year colleges was $30,900 at for-profit schools in 2008, compared with $15,600 at public and $26,600 at private nonprofits. 

In the late 1980s, a series of scandals led to congressional action that restricted for-profit schools’ access to federal dollars. To rein in institutions whose graduates tended to face financial difficulty, Congress moved in 1989 to ban colleges from receiving Pell Grants and many other types of federal student aid if too many of their students defaulted on their loans after two years.  In 1992, Congress enacted the 85/15 rule, which required higher education institutions to generate at least 15 percent of their revenues from non-Title IV federal assistance—which includes Pell Grants and Stafford Loans, but not military student aid like the G.I. Bill. In 1998 that ratio was changed to 90/10.

More than 1.8 million students were enrolled in 2009 at degree-granting proprietary institutions eligible for Title IV financial aid, according to a February 2012 working paper from the Center for Analysis of Postsecondary Education and Employment. That represented more than 9 percent of students at aid-eligible degree-granting schools, up from just 0.2 percent in 1970. From 2000 to 2009, enrollment tripled in for-profit, aid-eligible schools, while enrollment for the rest of higher education increased by 22 percent. And those 2009 data do not include nearly 1,000 proprietary colleges that the U.S. Department of Education has excluded from access to taxpayer funds due to persistently high student default rates.

According to 2012 data, the default rate for loans issued to students at for-profits was 15 percent. Loans tied to public institutions were at 7.2 percent, and private nonprofits 4.6 percent. When the Education Department changes its cohort rate from a two-year to a three-year model in 2014, those default rates are expected to increase.

Many industry critics argue that for-profit schools have often emphasized recruiting new students at the expense of helping them earn degrees or get jobs. In 2004, the University of Phoenix, the industry’s largest institution, paid the biggest fine in Education Department history—$9.8 million—to settle charges that it had tied recruiters’ salaries to enrollment increases despite a federal ban on the practice. A U.S. Senate committee investigation found Ashford University, a for-profit institution with 78,000 online students, employed 1,700 student recruiters but only one job placement specialist. The committee also found 84 percent of Ashford’s two-year degree students enrolled in 2008 had dropped out by 2010.

For-profits have also been cited for predatory enrollment practices that allegedly target combat veterans. Stories of recruiters arriving at the hospital rooms of soldiers with head wounds to sign them up for classes led President Barack Obama to sign an executive order in April 2012. It called on colleges to crack down on false advertisements on military bases and other misleading information.

In 2005, the Inspector General of the U.S. Education Department testified before a congressional panel that 74 percent of the agency’s cases of student aid fraud by institutions involved proprietary colleges.

But the perhaps the biggest blow to the sector was a 2010 report released by the Government Accountability Office (GAO) commissioned by Sen. Tom Harkin, D-Iowa, chairman of the Senate Committee on Health, Education, Labor and Pensions. It found that for-profit college recruiters encourage students to falsify personal and financial information to qualify for more federally backed financial aid. GAO investigators posing as students also reported that 15 institutions greatly exaggerated the potential earnings the programs would bring. Later that year, the GAO revised the report to soften some of the conclusions. Yet a follow-up investigation in 2011 found more problems, such as lax rules on proving high school graduation and weak standards for policing such abuses as plagiarism.

Following the 2008 reauthorization of the Higher Education Act, the U.S. Department of Education was tasked with setting up rules for how best to monitor career colleges. After more than a year of high-profile debate, the department finalized “gainful employment” rules in June 2011. The rules, which penalize schools with low student debt repayment rates and high debt-to-income ratios, were widely seen as less rigorous than versions first proposed in 2010. Inside Higher Ed published a helpful guide to the two versions of the gainful employment rules. A federal court ruling in June 2012 invalidated the requirement that at least 35 percent of a program’s former students pay back their federal student loans. That ruling, and the ongoing legal processes, have inhibited early enforcement of the gainful employment policies.

In March of 2014 the Obama administration proposed a revised, tougher set of restrictions on the industry, including penalizing programs for having high cohort default rates and students whose incomes don’t exceed a certain ratio of wages to debt. Career colleges are likely to sue. 

Supporters say that for-profit colleges offer programs to individuals looking to broaden their skills that community colleges—the chief rivals of for-profits—have been slow to provide. For-profit schools also offer training for trades that liberal arts institutions have never entered or long abandoned. Those offerings are attracting students that might not pursue a postsecondary education otherwise, supporters argue.

The federal government’s tougher stance toward for-profit colleges is not winning over some organizations that advocate for low-income populations. After Congress ended the practice of allowing for-profit students to qualify for federal financial aid without earning a high school diploma or GED, CLASP, a Washington-based advocacy organization for low-income people, criticized the new rule as an obstacle to low-skilled workers who need pathways to better jobs.  

In general, students entering for-profits have lower incomes than those starting community college, according to a 2010 study commissioned by a career college.

Students at for-profit institutions also are more likely to be female, to be African-American and to be beyond traditional college age. According to federal data from 2009-10, African-Americans accounted for 22 percent of the enrollment of for-profit institutions, compared with 14 percent at two-year public colleges and 11 percent at four-year public colleges. Fifteen percent of students in for-profits were Hispanic, compared with nearly 16 percent at two-year and 10 percent at four-year public colleges. About 65 percent of students in for-profit institutions were 25 years and older, compared with 31 percent at four-year public and 40 percent at two-year public colleges. And about two-thirds of students at for-profits were female.

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Sullivan wasn’t alone. Hundreds of cosmetology schools across the country were suddenly in danger of losing access to government financial aid and shutting down. Obama’s rules promised to decimate the industry, likely shutting down 91 of the country’s nearly 900 programs and putting another 270 in the “zone,” at risk of closure.

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A new project by The Hechinger Report, The Teacher Project, and Slate features early learners.  


In California classrooms, teaching LGBT means teachers face difficult questions about historical figures who were not necessarily “out,” explains EdSource’s Theresa Harrington.


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Victoria Pasquantonio reports on how a professor uses her story of personal tragedy to teach students about media literacy, for PBS Newshour


A Florida couple whose son attends a private school for special-needs students contested U.S. Secretary of Education Betsy Devos’ use of their story to promote voucher programs, reports Ann Schimke for Chalkbeat Colorado


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October 19 – October 26
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Ann Dornfeld at KUOW public radio examines how an extremely high rate of homelessness at a Seattle elementary school, exacerbated by recent redistricting, has overwhelmed the school’s support structure. 


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Latest News

For-Profit Schools Get State Dollars For Dropouts Who Rarely Drop In

Last school year, Ohio’s cash-strapped education department paid Capital High $1.4 million in taxpayer dollars to teach students on the verge of dropping out. But on a Thursday in May, students’ workstations in the storefront charter school run by for-profit EdisonLearning resembled place settings for a dinner party where most guests never arrived.

In one room, empty chairs faced 25 blank computer monitors. Just three students sat in a science lab down the hall, and nine more in an unlit classroom, including one youth who sprawled out, head down, sleeping.


Higher Ed 2017: Covering Campus Conflict in the Time of Trump
Atlanta • October 2–3, 2017

From heated debates over free speech to the Trump administration’s threats to deport undocumented students, these are tense times on college campuses. For reporters who cover higher education, questions abound and important stories need to be told. 

On Oct. 2-3, EWA will bring together journalists at Georgia State University in Atlanta to explore pressing issues in education after high school. (Here’s the preliminary agenda.) At this journalist-only seminar you will hear:

Member Stories

September 21 – 28
Here's what we're reading by EWA members this week

Jennifer Chambers of the Detroit News reports on Ivanka Trump’s visit to Detroit to help advance a $500 public-private partnership to promote STEM and computer science in the nation’s schools.


Education Week’s Evie Blad examines the First Amendment rights of students in light of recent protests at national sporting events, and gives advice to educators on how to turn such events into a teachable moment. 


Blog: Higher Ed Beat

The Future of For-Profit Colleges

Despite high-profile scandals over cost and credentials, for-profit colleges attract hundreds of thousands of new students each year, enrolling an estimated 10 to 13 percent of higher education students.

Agile in delivery and content, these educational entrepreneurs can pivot to meet demand faster than typically tradition-corseted nonprofit institutions, argued Neal McCluskey of the Cato Institute.  


How Much Do For-profit Colleges Rely On Federal Funds?
Brookings Institution

The outgoing Obama administration placed for-profit colleges under a great deal of scrutiny. This includes gainful employment regulations that will require graduates of vocationally-oriented programs to meet debt-to-earnings requirements and borrower defense to repayment rules (which will likely be quickly abandoned by the Trump administration) designed to help students who feel they were defrauded by their college.


How Much Do For-profit Colleges Rely on Federal Funds?
Brookings Institution

I examined data from the Department of Education between the 2007-08 and 2014-15 academic years to look at how many for-profit colleges are close to the 90 percent threshold. As the table below shows, a sizable percentage of for-profit colleges get between 80 percent and 90 percent of their revenue from federal financial aid. In 2007-08 (the last year before the Great Recession), 23 percent of colleges were in this category.

Blog: Higher Ed Beat

Obama Ed Dept. Puts For-Profits on Notice, But Will Trump’s Follow Through?

With just days remaining in office, the Obama administration is still leaving its regulatory footprint, this time by releasing new data that show that nearly all of the career programs running afoul of federal student debt-to-earnings regulations are for-profit colleges. Scrutiny of the for-profit sector has been one of the signature drives of the Obama administration. How these institutions fare under President-elect Trump’s White House could be a key issue for the next four years.

EWA Radio

Who Is Betsy DeVos?
EWA Radio: Episode 102

Veteran education reporters from the Detroit Free Press and The Washington Post discuss Betsy DeVos, the billionaire school choice advocate nominated by President-elect Donald Trump. David Jesse of the Detroit newspaper sheds light on DeVos’ Michigan track record on legislative causes, and what is known about her tactics and negotiating style. Plus, he explains how DeVos’ strong religious beliefs have influenced her policy agenda. Emma Brown of The Washington Post details why Trump’s proposal for $20 billion in school vouchers might be a tough sell, even to a Republican-controlled Congress. And she sheds light on the potential for the next administration to dismantle President Obama’s education initiatives, including scaling back the reach of the Office for Civil Rights at the Education Department.

EWA Radio

Trump Is Elected: What’s Next for Education Policy?
EWA Radio: Episode 97

Donald Trump spent little time on education issues during his campaign, but his victory is sure to have big implications. Journalists Alyson Klein of Education Week and Andrew Kreighbaum of Inside Higher Ed discuss the likely impact on P-12 and higher education. What will be President-elect Trump’s education priorities, and how will the GOP-controlled Congress respond? Will Trump follow through on his campaign pledge to provide $20 billion for school choice? What will be the fate of existing federal policy like the new Every Student Succeeds Act? And how will Trump approach the hot-button higher education issues like student loan debt and accountability?  


Doing More With Higher Ed Data: From Policy to Newsrooms
Philadelphia • February 2–3, 2017

With colleges and universities under increased pressure to ensure that more students earn degrees without amassing mountains of debt, journalists are at the forefront in examining how these institutions  measure up. But there’s one major obstacle that both colleges and reporters share when it comes to making sense of how well these schools are meeting their goals: insufficient data.

Blog: Higher Ed Beat

Understanding the Student Loan-Debt Picture

By Dwight Burdette, CC BY 3.0, via Wikimedia Commons

“There’s a lot of talk about the student debt crisis and I’m going to tell you that I don’t think there really is a student debt crisis,” said Debbie Cochrane, vice president at The Institute for College Access and Success. “What there are are multiple student debt crises.”


Know the Score: Finding Stories in College Scorecard Data

Know the Score: Finding Stories in College Scorecard Data

How many first-generation students does a college have? How much does the school charge students from families earning $30,000 versus more than $75,000? And how many students are repaying their student loan debt three years after college?


Proposed Student Finance Regulations May Hamper Small Institutions
The Brookings Institution

In June, the U.S. Department of Education released a 530-page set of proposed regulations on the topic of ‘defense to repayment.’ Although this sounds like an obscure topic (and reading the document is no picnic!), these proposed rules, if adopted, could allow students to be able to have their student loan debt forgiven if colleges misrepresented themselves to students. The Department of Education is currently working through this process forformer Corinthian Colleges students, and tens of thousands more students could be eligible under the proposed rules.


The U.S. Elections & Education: Part 1
Washington, D.C. • August 30, 2016

Now that the White House race has narrowed to Hillary Clinton and Donald Trump, how is education playing out as an issue in the campaign? Will it prove an important fault line between the Democratic and Republican candidates? Will Trump offer any details to contrast with Clinton’s extensive set of proposals from early childhood to higher education? What are the potential implications for schools and colleges depending on who wins the White House? Also, what other races this fall should be on the radar of journalists, whether elections for Congress, state legislatures, or governor?

Blog: Higher Ed Beat

Higher Education and the 2016 Presidential Election

Flickr/Michael Vadon (CC BY-SA 2.0)

The first total solar eclipse to sweep across the entire continental United States in 38 years will occur on August 21, 2017. Don’t expect reauthorization of the Higher Education Act (HEA) anytime before then.

The HEA expired at the end of 2013 and it’s likely nothing will happen with it in an election year or soon thereafter, agreed a panel of journalists discussing key higher education issues and the 2016 presidential election, at the Education Writers Association National Seminar in Boston in May.


Gainfully Employed? Assessing the Employment and Earnings of For-Profit College Students Using Administrative Data
National Bureau of Economic Research

We draw on population-level administrative data from the U.S. Department of Education and the Internal Revenue Service to quantify the impact of for-profit college attendance on the employment and earnings of over 1.4 million students. We characterize both the within-student earnings effects and joint distributions of earnings effects and increases in student debt.


Higher Ed 2016
September 16–17 • Tempe, Arizona

What new techniques and practices should higher education embrace to ensure that more students graduate? Join the Education Writers Association September 16–17 at Arizona State University to explore cutting-edge innovations that aim to address financial, academic, and social barriers. More on the seminar theme.

This annual seminar is one of the largest gatherings of journalists covering postsecondary education. Network with others covering this beat and step up your coverage for the upcoming academic year.

Arizona State University
Tempe, Arizona

Seven Challenges First-Generation College Students Face & How to Write About Them


While many first-generation students are excited and ambitious when they step on campus — eager to beat the odds and become the first in their families to earn a college degree — others struggle with guilt, fear and loneliness, sometimes even struggling to remember why they decided to attend college in the first place. And they grapple with these feelings while they also have to figure out how to apply for financial aid, register for classes, and manage the other necessities of undergraduate life knowing they can’t turn to their families for guidance based on experience.

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Debt-Free College: Why It’s News Now

As Democratic presidential hopefuls assemble in Las Vegas today for their first formal debate, one topic that has received little airtime during the Republican face-offs is likely to garner far more attention: the high cost of attaining a college degree.


69th EWA National Seminar

The Education Writers Association, the national professional organization for journalists who cover education, is thrilled to announce that its annual conference will take place from Sunday, May 1, through Tuesday, May 3, 2016, in the historic city of Boston.

Co-hosted by Boston University’s College of Communication and School of Education, EWA’s 69th National Seminar will examine a wide array of timely topics in education — from early childhood through career — while expanding and sharpening participants’ skills in reporting and storytelling.

Boston, Massachusetts
EWA Radio

After Pushback, White House Yields on College Ratings
EWA Radio: Episode 28

After nearly two years of public debate, and vociferous pushback from the higher education community, the White House announced it is pulling back on plans to rate the nation’s colleges based on a complex matrix of performance measures and student outcomes. Paul Fain, news editor for Inside Higher Ed has been following this story closely since the beginning, and he helped break the news that the Obama administration was scrapping the most controversial parts of its original proposal.

He spoke with EWA public editor Emily Richmond about who’s surprised by the decision (hint: not a lot of people), and the role played by aggressive lobbying against the rating plan by much of the higher education community. Fain and Richmond also discussed college ratings and consumer tools already available, and how to answer parents and students who ask for advice on choosing a school.

Blog: The Educated Reporter

Keeping Track of For-Profit Colleges


With a top advocate for for-profit colleges at her right, and a man leading the legal campaign against wayward for-profits at her left, Chronicle of Higher Education financial reporter Goldie Blumenstyk jokingly reassured her audience: “Despite what this looks like, it’s not going to be a debate.”

Blog: The Educated Reporter

Deciphering Student-Loan Default Rates

© PamelaJoeMcFarlane (Source: iStock)

The federal government today released a snapshot of how well borrowers with federal student loans are repaying their debts, indicating that fewer Americans are defaulting on their college loans compared to past years, but that the figures still exceed pre-recession levels.


The Good, the Bad, and the Ugly: Covering the College Student Experience
2014 Higher Ed Seminar

For many college students — whether fresh out of high school or adults returning to school — their most serious obstacles to a degree won’t be homework or tests, but rather the challenges of navigating student life. Colleges are now being forced to face the longstanding problems that have often led to students’ flailing and failing on their own. 

Blog: Latino Ed Beat

Why Did a ‘Hispanic’ University Fail?

When the National Hispanic University opened in California in 1981, founder B. Roberto Cruz was frustrated about how few Latinos were enrolled in college.

NPR reports that the San Jose-based university’s mission was to create a culturally sensitive space for Latino college students in the same way that historically black colleges and universities had done for black students many years earlier.

Blog: The Educated Reporter

From Battlefield to Classroom: Veterans Head for Higher Education

James Dao of the New York Times has a fascinating story about active-duty troops and veterans taking advantage of federal tuition assistance for higher education, often in unusually challenging circumstances.

From Dao’s story, here’s the scene at a U.S. military airfield in Afghanistan moments after humanities class’ discussion of Mary Shelley’s “Frankenstein” was interrupted by a rocket attack:

Key Coverage

Bloomberg Investigation: For-Profit Colleges

This Web page gathers all of this news organization’s groundbreaking coverage of proprietary colleges, which prompted Congressional hearings. “While federal aid to these colleges, owned by such prominent corporations as Goldman Sachs Group and Washington Post Co., has increased sixfold in a decade and their executives have pocketed $2 billion in pay and stock sales, most for-profit college students drop out and can’t repay their loans.” 


The Coalition for Educational Success

The Coalition for Educational Success “advocates for government policies that support wider access to higher education, particularly for non-traditional students – full-time workers, workforce returners, working parents, minorities, and veterans, among others – that depend most heavily on career colleges.” 

Key Coverage

Judge Refuses to Restore Vacated Provisions of ‘Gainful Employment’ Rule

The provisions of the rule that Judge Contreras invalidated last summer include three “debt measures” the department wants to use in determining whether programs are in fact preparing their students for gainful employment. Those measures would examine the income earned and debt repaid by students after leaving the programs, and would require institutions to meet at least one of three benchmarks in order to remain eligible to receive federal student aid. 

Key Coverage

For-Profit Woes Means Less Work for Adjuncts

One of the big draws of online education is that it can be easily untethered from the traditional semester schedule, with online universities often offering new classes 52 weeks a year. But while they are convenient for students, and profitable for institutions, rolling starts for classes can mean flimsy job security for the adjunct professors who teach them.

Key Coverage

For-Profit Colleges Manage Student Loan Default Rates, Senators Call For Investigation

As growing numbers of students at for-profit colleges have defaulted on their debts in recent years, bringing government scrutiny and the threat of financial penalties, some institutions have unleashed a novel strategy aimed at improving their numbers: They have systematically encouraged students to stay current on their debts just past the point at which the government measures default rates. 


The For-Profit Higher Education Industry, By the Numbers

Based on a two-year effort, the report detailed high rates of loan default, aggressive recruiting, higher than average tuition, low retention rates, and little job placement assistance. It was spearheaded by Sen. Tom Harkin, D-Iowa, a longtime critic of the industry.

(ProPublica has written a number of pieces looking more closely at the explosive growth sector, including questionable recruiting and marketing.) The Association of Private Sector Colleges and Universities, a membership organization composed of accredited for-profit schools, issued a statement criticizing what it saw as “continued political attacks” on the for-profit sector. Saying the report “twists the facts to fit a narrative,” it went on to challenge several figures. It didn’t contest the following numbers.


The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?

This working paper examines the growth in the proprietary college sector. The researchers conclude that “for-profits educate a larger fraction of minority, disadvantaged, and older students, and they have greater success at retaining students in their first year and getting them to complete short programs at the certificate and associate degree levels.

But [they] also find that for-profit students end up with higher unemployment and “idleness” rates and lower earnings six years after entering programs than do comparable students from other schools, and that they have far greater student debt burdens and default rates on their student loans.”

Key Coverage

GAO Takes Another Crack

On the heels of the Congressional hearings regarding for-profit colleges, the U.S. Government Accountability Office investigated the recruiting practices at 15 proprietary colleges. “The findings were mixed, but investigators uncovered problems with how seven of the colleges handled online course grading, academic dishonesty or students’ exit counseling.”

Key Coverage

Enrollments Plunge at Many For-Profit Colleges

This article notes that enrollment of new students dropped an average of 14 percent at 10 large proprietary colleges. “The slide has come as some of those institutions curbed their aggressive recruiting practices amid growing pressure from federal and state lawmakers.”

Key Coverage

Your Guide to ‘Gainful Employment’

This article offers a helpful chart that compares the proposed rules for how many graduates of a college must have quality jobs in order for it to receive funding from the federal financial aid that flows through its students. The requirement essentially has been considered one way to regulate the practices of for-profit colleges. The final rules were thought to be more lenient than the original proposals. 


For Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices

This groundbreaking report led to Congressional hearings of proprietary colleges and the subsequent changes in the ‘gainful employment’ rule. Among its most compelling charges, the undercover applicants were encouraged to falsify their financial aid information and were given faulty information about potential salaries and attendance requirements. 

Key Coverage

Homeless Dropouts From High School Lured by For-Profit Colleges

EWA 2010 National Reporting Contest winner. Some recruiters from for-profit colleges promised cars, jobs, and new lives to individuals living in shelters and missions. One college campus even gave students a $350 biweekly stipend to show up to class and maintain a C average. Five percent of its student base is homeless.


Characteristics of Students Enrolling at For-Profit Colleges

This study notes that recent high school graduates “who enrolled at for-profit colleges most often identified job prospects after graduation and close to home as reasons why they chose their enrollment college. This contrasts with the all student baseline, where quality of major, academic reputation, and campus setting/environment are most often identified as reasons for choosing their enrollment college.”