But today they are facing two imminent threats to their near-monopoly of higher education. The first is the expansion of educational providers that exist solely on private support. The second comes from the small but growing efforts of for-profit universities, heavily influenced by commercial education ventures in the United States.
It seems too good to be true, at least for companies. Customers arrive at for-profit colleges by the million. With them comes billions of dollars of federal student grants and loans, to be poured into corporate coffers. Public subsidies may provide up to 90% of revenue; the government bears the risk of loan defaults. This business model has served firms rather well. Its effect on students and taxpayers is less clear. This summer, however, a brawl over for-profit colleges has exploded at last.
More than a dozen private colleges have had their credit ratings downgraded since the start of 2010, most of them tuition-dependent, less-than-selective institutions facing the challenge of attracting students in a bad economy and a competitive market.
Students in self-financing universities and colleges may soon be eligible for a large number of University Grants Commission (UGC) fellowships and scholarships that at present are open only to students from institutions receiving government grants. The UGC has proposed allowing students from private universities benefits like the Junior Research Fellowship (JRF) and the Post Graduate Merit Scholarship, top government officials revealed.
Especially alarming were the numbers for two-year and for-profit colleges, with 40 percent of students who borrowed loans to attend for-profit institutions defaulting since 1995. This data comes just when for-profit colleges are being subjected to federal scrutiny in part because of the amount of federal financial aid they draw and the amount they spend on expenses other than teaching. “While for-profits educate less than 10 percent of students, those colleges’ students received close to a quarter of Pell Grant and federal-student-loan dollars in 2008,” according to the Chronicle article.