Once heralded as the next step in the evolution of education, for-profit universities are dropping like flies. Recent rules and regulations have limited their federal funding and current lawsuits allege misconduct that’s causing enrollment to drop and suspicions to increase.

So what does the future hold for these oft-criticized institutions?

The Numbers

Between 2011 and 2014, the number of students enrolled at four-year for-profit schools dropped 16.2%, while enrollment at nonprofit schools increased.

The trend was the same for two-year for-profit schools and less than two-year programs at for-profit schools, which declined 22.8% and 12.6%, respectively.

During that same time period, four-year public and private schools grew .3% and 1.7%, respectively.

In 2015 alone, programs with about 830,000 students closed due to new regulations from the federal government. Currently, enrollment at for-profit schools

According to the National Center for Education Statistics, for-profit schools saw a huge boom between 2000 and 2010, growing 325%. Enrollment at public schools and private nonprofit schools rose 30% and 20%, respectively.

The peak for for-profit colleges came in 2010, when people flocked to these schools in the wake of the recession.

The Reason

While President Bush’s administration was lax toward for-profit schools, President Obama has been an ardent opponent. It’s his administration that has enforced the gainful employment rule that allows colleges to be judged based on how much debt their graduates have compared to how much they’re earning.

If a college lets its students leave with students loans and little chance of finding work in their chosen field, they might stop receiving federal funding. Without federal funding, these schools have little chance of remaining open.

It’s this new rule that prompted for-college behemoth Corinthian Colleges to close last year. Even the University of Phoenix, perhaps the most well-known in this category, has seen its enrollment drop by 50% in five years.

While some argue that this rule unfairly targets for-profit schools, the numbers are not in their favor. While less than 10% of students attend for-profit schools, almost half of graduates who default on their student loans are graduates of those schools. In 2011, that figure was at 70%.

Some for-profit attendees are receiving forgiveness for federal loans taken out if their school later shut down. That means that taxpayers are funding these schools who fail to provide students with applicable job skills.

The Future

One of the best outcomes from the gainful employment rule is that schools have to be transparent about how much their graduates are paying in student loans compared to how much they’re earning.

By empowering prospective students with more information, more people will have the ability to avoid falling behind on their loans.

The implementation of the gainful employment rule appears to be weeding out the for-profit schools that cannot produce programs that will help graduates find good work. The for-profit schools that are focused on job placement will have a better chance of keeping their funding than those focused on maximizing profit.

One of the main reasons these schools flourished initially is because they offered class times during non-business hours, popular for adults working and going back to school.

Now that more non-profit colleges are recognizing this demographic was one to target, for-profit schools have little to distinguish themselves.

What do you think of for-profit universities?

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