Today, the for-profit-education bubble is deflating. Regulators have been cracking down on the industry’s misdeeds—most notably, lying about job-placement rates. In May, Corinthian Colleges, once the second-largest for-profit chain in the country, went bankrupt. Enrollment at the University of Phoenix has fallen by more than half since 2010; a few weeks ago, the Department of Defense said that it wouldn’t fund troops who enrolled there. Other institutions have experienced similar declines.
The fundamental problem is that these schools made promises they couldn’t keep. For-profit colleges are far more expensive than community colleges, their closest peers, but, according to a 2013 study by three Harvard professors, their graduates have lower earnings and are actually more likely to end up unemployed. To make matters worse, these students are usually in a lot of debt. Ninety-six per cent of them take out loans, and they owe an average of more than forty thousand dollars. According to a study by the economists Adam Looney and Constantine Yannelis, students at for-profit schools are roughly three times as likely to default as students at traditional colleges. And the ones who don’t default often use deferments to stay afloat: according to the Department of Education, seventy-one per cent of the alumni of American National University hadn’t repaid a dime, even after being out of school for five years.