The diploma was the product.
For-profit colleges ran on your tax dollars, spent more on recruiting than teaching, and when the biggest chains collapsed, the students were left with the debt and the public was left with the bill.
We grade the taxpayer funding, the private-equity ownership, and the collapses — and we're precise about which chains were PE-owned and which weren't.
What this page is about
The for-profit college is the private-equity playbook run on a public subsidy. These schools were financed almost entirely by taxpayers — federal Pell Grants and student loans, plus GI Bill and military tuition money — and private equity recognized that a business paid by the government, per enrolled student, rewards one thing above all: enrollment. So the money went to recruiting, not teaching, and the risk went to the students and the Treasury.
The emblem of the PE version is Education Management Corporation (EDMC), taken private in a 2006 leveraged buyout led by Goldman Sachs's private-equity arm and Providence Equity. Around 80 percent of its money came from the government, and in 2009 it put more than a fifth of its revenue into marketing. When the two most notorious chains — Corinthian and ITT — collapsed amid fraud findings, students were left with worthless credentials and debt, and taxpayers ultimately absorbed billions in loan discharges. This page grades that, and stays precise about who owned what.
The same investigation, restaged one beat at a time. Step through it here, or present it fullscreen.
The diploma was the product.
For-profit colleges ran on your tax dollars, spent more on recruiting than teaching, and when the biggest chains collapsed, students got the debt and the public got the bill.
Public money, private owners, private losses
For-profit colleges ran overwhelmingly on taxpayer money.
FACTThese are private businesses financed by the public. Federal law caps the share of revenue a for-profit college can draw from federal Title IV aid at 90% (the '90/10 rule') — a ceiling that exists precisely because the schools push right up against it. Education Management Corporation drew roughly 80% of its funds from government sources: Department of Education Title IV programs (Pell Grants and federal student loans), the Department of Defense, and the Veterans Administration. The 'customer' paying the bill was, overwhelmingly, the taxpayer.
Private equity bought into the sector — EDMC is the flagship case.
FACTIn 2006, private equity firms led by Goldman Sachs Capital Partners and Providence Equity Partners took EDMC private in a leveraged buyout valued at about $3.4 billion, loading the balance sheet with buyout debt. EDMC's enrollment roughly doubled by 2010 as recruiting ramped up, then fell when new rules barred tying recruiter pay to enrollment. When the debt caught up, EDMC's lenders — led by the PE firm KKR — later converted their loans into a roughly 90% equity stake. This is the playbook: buy with debt, grow enrollment, extract.
- Higher Ed Dive — Private equity's role in the rise and fall of for-profit colleges (2006 $3.4B EDMC LBO)
- New America — What's the Matter with EDMC? (Goldman + PE ownership)
- Private Equity Stakeholder Project — deceptive practices by PE-owned for-profit colleges (Goldman/Providence/Leeds; KKR 90% stake in 2014)
The money went to recruiting, not teaching.
FACTThe incentive of a per-enrollee government subsidy shows up in the budget. In 2009, EDMC put 21.6% of its revenue — about $435 million — into marketing and recruiting, and 16% — about $319 million — into profit. Dollars that arrived as education aid left as advertising and margin. That is the extraction mechanic of the whole hub, applied to a diploma: the public pays for schooling, and the owners are paid for enrollment.
When the chains collapsed, students got the debt and taxpayers got the bill.
FACTThe two most notorious for-profit chains — Corinthian Colleges (2015) and ITT Technical Institute (2016) — collapsed amid state and federal findings that they had defrauded students, closing nearly overnight and leaving tens of thousands without the credentials they'd borrowed for. The federal 'borrower defense to repayment' provision, on the books since 1994 but rarely used, was overwhelmed with claims; a later settlement forgave roughly $6 billion in loans for defrauded students — a cost borne by the public, not the owners who profited on the way up.
Precise about ownership, honest about the sector
- Corinthian and ITT were public companies, not PE. We keep this straight. The clean private-equity case is EDMC (Goldman, Providence, later KKR). Corinthian and ITT are the emblematic collapsesthat show what the for-profit model does to students; conflating their ownership would be sloppy, and we don't.
- The sector isn't all fraud. For-profit and career colleges do reach working adults, veterans, and first-generation students that traditional higher ed underserves. The critique is the model where a government per-head subsidy plus PE's extraction incentive rewards enrollment over outcomes — not a claim that every program is worthless.
- Regulation did bite. The decline wasn't only collapse; the incentive-compensation ban and gainful-employment rules genuinely curbed the worst recruiting. That's part of the story, and it points to where the fix lives: the rules, not just the lawsuits after the fact.
A public subsidy, privately extracted
Education is the same shape as the other sectors in The Private Equity Playbook: a stream of public money — here, federal student aid — that a leveraged owner can capture by maximizing volume and minimizing the actual service. Like the nursing-home case, the customer paying the bill is the government, the quality that gets cut is the thing the money was for, and the people who can least afford it — students taking on non-dischargeable debt — absorb the loss.
It's squarely a Looting the American Public story: billions in Title IV aid converted into marketing and margin, then billions more in loan forgiveness charged to taxpayers when the fraud came due. The owners captured the upside; the public and the students split the downside.
Questions worth taking seriously
Weren't the students at fault for taking on the debt?
The federal borrower-defense discharges exist for one legal reason: the schools were found to have defrauded them — lying about job placement, accreditation, or credit transfer. You can believe in personal responsibility and still recognize that “I was lied to by a school my government funded and accredited” is a different situation from a bad free choice. That's why the law forgives these specific loans.
If EDMC was PE-owned but Corinthian and ITT weren't, why group them?
Because the sector is the story, and it shows both the ownership and the outcome. EDMC is the clean example of the PE model — buyout debt, recruiting spend, extraction. Corinthian and ITT are the clean examples of what the for-profit model does when it fails: students stranded, taxpayers billed. We label which is which rather than blur them, because the precision is what makes the argument hold.
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This site aggregates and grades a record that other outlets and primary sources have already put on the record. Every FACT-graded claim above is sourced to court filings, government reports, sworn whistleblower disclosures, published investigative journalism, or named-source statements. The citations are the accountability mechanism; this section is how you get on the record too.
The record
- Higher Ed Dive — Private equity's role in the rise and fall of for-profit colleges
- New America — What's the Matter with EDMC?
- Private Equity Stakeholder Project — Deceptive practices by PE-owned for-profit colleges
- Education Management Corporation — funding sources and spending breakdown
- AP News — Settlement would forgive $6B for defrauded college students
- New America — the Corinthian and ITT collapses