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The Rise and Fall of Enrollment at For-Profit Colleges

Hans Johnson June 28, 2016

Increased demand for postsecondary education in California has contributed to dramatic growth in enrollment at for-profit colleges. But in recent years, this trend has begun to reverse. Many students who saw for-profit colleges as a viable alternative to public and private nonprofit institutions are in debt and without a degree, and some for-profit colleges are now the focus of state and national investigations, lawsuits, and sanctions.

California is home to almost 400 private, for-profit postsecondary institutions that are eligible to participate in federal financial aid programs. These colleges vary widely in size and mission, from small independent vocational schools enrolling only a few dozen students to large national chains that enroll thousands and offer graduate as well as bachelor’s degrees. Altogether, for-profit colleges make up more than half of all postsecondary institutions in the state and enroll one in eight postsecondary students.

Enrollment at for-profit colleges in California almost tripled between 2004 and 2011, growing from 109,000 students to 289,000 students (as measured by full-time equivalent enrollment). Over the same period, enrollment in other colleges changed very little (increasing only 12%). By 2011, one in seven college students attended a for-profit institution. For-profit colleges enrolled more students than the University of California system and all private nonprofit colleges in the state.

But since 2011, enrollment in for-profit colleges has declined by more than 40,000 students, a 15% drop. Every sector of for-profit colleges experienced declines, with the sharpest reduction (29%) occurring among two-year institutions. Meanwhile, public and private nonprofit colleges saw slight enrollment increases during this same time frame.

What accounts for the rise and fall of enrollment at for-profit colleges?

Certainly, students were attracted to the easy access and convenient course times that for-profit colleges offered—something that other colleges can and have been learning from. But investigators have also found that a number of for-profit colleges engaged in predatory marketing practices, targeting vulnerable students and making false promises about job placement. Such practices may have helped enrollment growth at first, but as these practices became more well-known, and as regulatory and legal actions became more widespread, enrollment began to decline.

The decline also coincides with restrictions on institutional eligibility for the state’s large financial aid program, Cal Grants. In 2011, institutions with a high share of students receiving federal loans were required for the first time to meet minimum standards for graduation rates and loan default rates for their students to remain eligible for Cal Grants. In 2014, only 40 of the 383 for-profit colleges in California met these standards and remained eligible for Cal Grants. Enrollment declines were smaller (9%) at the for-profit colleges that retained Cal Grant eligibility. (Students at colleges that do not meet the minimum standards for Cal Grant eligibility can still receive federal financial aid.)

The future of for-profit colleges is uncertain. In the near term, enrollment losses are likely to continue. Though not yet available, 2015 enrollment data will show further declines due to the closing of Corinthian Colleges, the parent company for Heald, Everest, and WyoTech colleges, in California. Those institutions enrolled over 15,000 students in fall 2014.

Meanwhile, the US Department of Education has taken aim at the Accrediting Council for Independent Colleges and Schools (ACISC), the largest accrediting agency of for-profit colleges in the nation. Continued actions such as this one could eventually lead to a loss of accreditation and hence federal funds for hundreds of for-profit institutions nationwide. Without federal funding, many for-profit colleges would be unable to operate, leading to further enrollment declines.

Chart source: Integrated Postsecondary Education Data System (IPEDS), fall full-time equivalent enrollment in California.

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