For-profit Education - Growth

Growth

While to some extent for-profit colleges have always existed, their numbers exploded after 1992, when after the United States House of Representatives Committee on Education and the Workforce created a federal regulation known as the "90-10 rule" and defined "institution of higher education" for the purposes of federal-aid eligibility as including for-profit institutions. The idea behind the 90-10 rule was that if a proprietary school's offerings were truly valuable – for example, if they filled some niche that traditional State and private non-profit educational institutions did not – then surely 10% of their students would be willing to pay completely out-of-pocket, i.e., those who fell above federal guidelines for receiving taxpayer subsidies to attend college. Traditional educational institutions routinely met this bar without even paying attention.

For-profit schools make up a small percentage of America's educational institutions, but the number of schools is growing. In February 2000, there were hundreds of thousands of students being taught at 200 for-profit postsecondary facilities, with approximately six percent of students nationally enrolled at a for-profit institution. Eduventures, a higher education research and consulting firm, states that nine percent of all U.S. college and graduate students attend for-profit institutions.

Between 1998 and 2000 a Boston-based company named Advantage Schools (since taken over by Mosaica Education) saw its revenue increase from $4 million to approximately $60 million. Between 1995 and 2000 the Edison Schools' yearly revenues grew from $12 million to $217 million. In 2000 Edison Schools projected that by 2006 it would manage about 423 schools with 260,000 students, giving it revenue of $1.8 billion.