Will the University of Phoenix Rise Again?

As for-profit colleges gear up for important new regulations, there are signs that the industry is beginning to lose some clout.

By Nathan Pippenger

If you want to see evidence of industry-killing regulations in action, take a look at the latest enrollment numbers from the University of Phoenix, America’s largest for-profit college and—not so long ago—a fearsome political force. Phoenix and other for-profit schools relied for years on federal largesse and lax regulation, receiving (in the most extreme cases) up to 90 percent of their revenue from federal loans and grants, charging their students exorbitant prices for shoddy education, and claiming to be as surprised as anybody when those students—unable to find work and burdened with huge debts—defaulted en masse. Just as analysts have responded to the coal industry’s sputtering complaints of a White House “war on coal” by saying “About time!”, this grim news and industry grumbling are cause for optimism.

The University of Phoenix has been struggling for some time now. For the last few years, it’s been reporting falling earnings and declining enrollment. And last fall, the Obama Administration took aim at its industry’s revenue stream, unveiling regulations that would halt the flow of federal aid to schools whose graduates were unable to find “gainful employment.” The chief trade group representing for-profit colleges sprung into action, suing in federal court to block the regulations from going into effect this summer as scheduled (a ruling is expected later this year). It also teamed up with Republicans in Congress to introduce bills delaying the regulations, or (in a more aggressive step) to repeal the rule altogether. That latter idea, in a particularly shameless bit of bill-titling, is dubbed the “Supporting Academic Freedom through Regulatory Relief Act.” Its sponsor is North Carolina Rep. Virginia Foxx (last seen endorsing the “death panel” lie), who, if this bill passes, will take her rightful place in history alongside Galileo.

The lobbyist pushback has been fierce, but even if the industry succeeds in delaying or further watering down these new regulations, larger trends may already be spelling trouble for its very worst practices. And the problems aren’t just regulatory. The White House’s recent announcement of a free community college program promises a major boost for the for-profit industry’s main competition, cutting into its already shrinking customer base. Phoenix announced this week that its enrollment has decreased by more than half from five years ago.

These numbers herald a decline in the industry’s clout. The combined forces of public scrutiny, tighter regulations, and new competition are starting to cut into the industry’s model of relying on government subsidies to take advantage of vulnerable students. If these new rules survive, making business less lucrative, they’ll contribute over time to fewer ripped-off students, fewer loan defaults, less time wasted in substandard degree programs, and fewer broken promises to students desperate for a degree and a job. This may yet vindicate one of the right’s favorite talking points about regulations: they really can hurt businesses. Sometimes, that’s exactly the point.

Nathan Pippenger is a contributing editor at Democracy. Follow him on Twitter at @NathanPip.

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