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As American For-Profit College Bubble Bursts, Industry Moves Overseas

For-profit colleges are increasingly moving overseas toward more friendly regulatory environments.

CREDIT: Flickr user Ryan McKnight.

For-profit colleges were once seen as the future of education, by both investors and educators alike. Targeting “non-traditional” students who were often older and went to college part-time, for-profit colleges were seen as broadening the umbrella of who could attain a higher education. From about 2000 until 2008 for-profit institutions saw their enrollment triple from 0.4 to 1.2 millions students, according to a study done by the National Center for Education Statistics. Meanwhile, private not-for-profit institutions saw a robust increase in enrollment of 15 percent. For a time, for-profit colleges were the beacon of hope of the higher education world.

All of that has changed now. For-profit institutions have seen decreasing profits, bankruptcy, and public opinion turn against them in recent years. Reports and indictments by the federal government have shed light on for-profit colleges’ deceptive and aggressive advertising practices. Most notably, DeVry University has recently been indicted by the FTC for their alleged falsifying of graduation rates and salaries. The for-profit bubble in the United States is popping, and many for-profits are devising creative ways to stay alive.

The shift in their practices is two-fold: for-profit colleges are doubling down on online education, and moving many resources to overseas markets. Seeing that the federal government has noticed their deceptive business model and the pubic opinion in the United States has turned against them, these companies seek a different market. A market that is less regulated and easier to continue their aggressive recruiting process, to get as many students in the door as possible. This market is overseas, with a specific emphasis on South America.

Many South American countries have either lax regulations on for-profit education or none whatsoever. This allows companies like DeVry University and University of Phoenix to continue their business in an environment that has little to no oversight; oversight that keeps students safer and less indebted.

The Wall Street Journal reported that private-equity firm Apollo Global Management LLC agreed to buy Apollo Education Group Inc. (which owns the University of Phoenix) for $1.1 billion. This transaction shows that investors believe that the move to a less regulated marketplace will keep for-profit education companies profitable and alive. This investment signals that the South American market will indeed be less regulated and will act as an easier location to continue their arguably harmful business ways.

While their practices are coming to light in the United States, and the American public is beginning to recognize the true impact of for-profit education, educational companies are beginning their transfer to less regulated waters. This transition may benefit the American student, by causing less for-profit colleges to pop up in the States, but is certainly harmful for worldwide higher education; something that Americans and non-Americans alike need to keep in mind.

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