[6] In the 1940s, "fly-by-night commercial vocational 'schools' sprang up to collect veterans' tuition grants" due to the newly created GI Bill's lax requirements and limited oversight to prevent such abuses.
Secretary of Education Richard W. Riley appointed former Career College's Association President Stephen J. Blair as the Liaison for Proprietary Institutions.
[15] In 2005, Department of Education Inspector General John B. Higgins reported that 74% of all institutional fraud investigations were for-profit colleges.
[10][page needed] The Los Angeles Times briefly described the role of Wall Street money in the growth of for-profit colleges.
[32] A two-year congressional investigation report—from a committee chaired by Senator Tom Harkin, D-Iowa—examined enrollment numbers in selected for-profit higher education institutions.
[35] For-profit colleges received less government scrutiny by the Republican-controlled Senate after 2014, but were recognized as a problem by the U.S. House Subcommittee on Labor, Health and Human Services, Education and Related Agencies in 2019.
[44] Decline in enrollment, revenues, and employees (2010 and 2017) Under the Obama administration (2009–2017), for-profit colleges received greater scrutiny and negative attention from the U.S. government.
[58] From 2017 to 2020, the Donald Trump administration and Secretary of Education Betsy DeVos accused the government of regulatory overreach and loosened regulations.
[66] On August 10, 2018, U.S. Education Secretary Betsy Devos scrapped a rule issued by ED in 2010 which would have forced for-profit colleges to prove that the students they enroll are able to attain "gainful employment.
[75][71] In a 2019 Brookings Institution report, students taking online courses at for-profit colleges were attracted to the programs for their ease of enrollment and help obtaining financial aid, but "disappointed with the poor quality of education.
[18][88] Wells Fargo was a major funder of Corinthian Colleges[89] and Goldman Sachs provided a significant amount of capital to Education Management Corporation.
[92] In the 1990s, Congress began requiring that for-profit schools receive at least 10% of their revenues from non-federal student aid sources, which include the GI Bill.
Federal regulatory actions by ED attempted to address these issues in the Title IV of the Higher Education Act of 1965, as amended, implementing regulations specifying requirements for gainful employment.
The judged denied the motion of the ED on the basis that the reporting requirements would violate the federal ban on the student unit record system.
Activist short seller Steve Eisman described the accreditation situation regarding for-profits like ITT as follows: "The scandal here is exactly akin to the rating agency role in subprime securitizations.
[126][127] Holly Petraeus, a high-ranking official at the Consumer Financial Protection Bureau, has accused for-profits of preying on vulnerable military personnel.
[128] Petraeus wrote:"This gives for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform, and to use aggressive marketing to draw them in and take out private loans...One of the most egregious reports of questionable marketing involved a college recruiter who visited a Marine barracks at Camp Lejeune, North Carolina.
[133][134][135] The position of the American Association of Collegiate Registrars and Admissions Officers (AACRAO) was that national accrediting standards were not as rigorous and, though they might be well-suited for vocational and career education, were ill-suited for academic institutions.
[136] AACRAO alleged that this proposed rule was unnecessary and unjustified, could threaten the autonomy and potentially lower the standards of regionally accredited schools, and drive up their costs.
They preside over almost half of those schools with the nation's worst student loan default rates....Ten of the 15 board members supervising the ACICS are drawn from the industry, including executives from Corinthian, Education Corporation of America and ITT Technical Institute.
On the ACCSC board, industry executives fill eight of the 13 slots, representing publicly traded companies such as Universal Technical Institute and Kaplan Higher Education.
"[137] In 2016, 12 Attorneys General asked the US Department of Education to stop the renewal of ACICS, the Accrediting Council for Independent Colleges and Schools.
[139] On June 23, 2016, The National Advisory Committee on Institutional Quality and Integrity (NACIQI), voted to revoke ACICS's power to accredit schools.
[10][page needed] In August 2010, the GAO reported on an investigation that randomly sampled student-recruiting practices of several for-profit institutions.
Investigators posing as prospective students documented deceptive recruiting practices, including misleading information about costs and potential future earnings.
[155] The US Department of Education (DoED) has proposed rules, "gainful employment regulations", that would provide more transparency and accountability to institutions that offer professional and technical training.
"[156] In his 2015 budget proposal, President Obama recommended greater regulation of for-profit education, including a closure of the loophole that exempted GI Bill money from being used in the 90-10 formula.
Journalists argue that these transitions are strategies to reduce state and federal regulations and to obtain more Title IV funds, as well as to improve reputations as for-profit education now has a stigma to the public.
[167] In 2016, Grand Canyon's regional accreditation body, The Higher Learning Commission, formally rejected the university's petition for conversion to non-profit status.
[175] In November 2024, the United States Court of Appeals for the Ninth Circuit held in a unanimous 3-0 decision that the U.S. Department of Education applied the wrong legal standards in evaluating Grand Canyon University's application.