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There are three types of for-profit schools. One type is known as an educational management organization (EMO), and these are primary and secondary educational institutions. EMOs work with school districts or charter schools, using public funds to finance operations. The majority of for-profit schools in the K–12 sector in America function as EMOs, and have grown in number in the mid-2000s. The other major category of for-profit schools are post-secondaryinstitutions which operate as businesses, receiving fees from each student they enroll. A third type of for-profit schools, which is less prevalent in the United States, are K–12 schools which operate as businesses.
EMOs function differently from charter schools created in order to carry out a particular teaching pedagogy; most charter schools are mission-oriented, while EMOs and other for-profit institutions are market-oriented. While supporters argue that the profit motive encourages efficiency, this arrangement has also drawn controversy and criticism. Kevin Carey, director of the education policy program of the New American Foundation said in a 2010 column in The Chronicle of Higher Education that "For-profits exist in large part to fix educational market failures left by traditional institutions, and they profit by serving students that public and private nonprofit institutions too often ignore." He also noted that "There's no doubt that the worst for-profits are ruthlessly exploiting the commodified college degree. But they didn't commodify it in the first place."
- 1 Growth
- 2 Potential benefits
- 3 Potential drawbacks
- 4 Accreditation and transfer-of-credits
- 5 Business failures
- 6 2010 Pell Grant fraud controversy
- 7 Classification of for-profit institutions
- 8 See also
- 9 References
- 10 Bibliography
- 11 Further reading
- 12 External links
While to some extent for-profit colleges have always existed, their numbers exploded after 1992, when after the United States House of RepresentativesCommittee 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 called 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.