For-Profit Colleges in the US: A Morally Bankrupt Sector?

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:


Case Code : BECG117 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges


Business Ethics / Business Environment / Public Policy
Case Length : 19 Pages
Period : 2008-2010
Organization : -
Pub Date : 2011
Teaching Note : Not Available
Countries : US
Industry : Education


For-profit colleges in the US came under increased scrutiny on several counts. The case describes the problems faced by for-profits in the US such as high loan default rates, vague accreditation standards, and low graduation and job placement rates. Complaints such as overpriced degrees, misleading claims, and increasing level of student debt resulted in the government turning its attention to the entire for-profit college sector. According to some reports, too much taxpayer money was being used to generate profits for the colleges, instead of providing students with useful high-quality education. The case also focuses on the alleged fraudulent practices adopted by for-profit colleges in the US to gain access to more federal financial aid.

Concerned about the disproportionate percentage of federal student aid flowing to for-profit colleges, some analysts began raising questions about the rapid growth of the for-profit education sector, the aggressive recruitment of students, and the value of the education provided by such institutions.

The case discusses the strategies followed by for-profit colleges in the US to attract more students. According to a report released by US Government Accountability Office (GAO), some for-profit colleges in the US were involved in deceptive practices and had made misleading statements to prospective students which included not providing clear information about the college's graduation rate, applicant's likely salary after graduation, accreditation of the school, and the duration and costs of the programs offered by the schools. The case concludes by detailing the new regulations proposed by the federal government for the for-profit education sector in order to safeguard students from misleading recruitment practices and incurring huge debts, among other issues.


Study the business practices adopted by players in the US for-profit education sector and discuss and debate the related ethical aspects.

Analyze the challenges faced by the for-profit colleges in the US, particularly, with the sector facing increasing scrutiny and with new rules being proposed to regulate the sector.

Explore strategies that the for-profit colleges can adopt to overcome these challenges


  Page No.
Putting Profits over Public Good? 1
Background Note 3
The Gao Report and its Findings 5
New Regulation 9
The Debate 10
Looking Ahead 12
Exhibits 14


Ethics, US for-profit education sector, New regulations, 'gainful employment' rule, Public policy, Deceptive marketing, University of Phoenix, Everest College, Westech College, Kaplan College, Potomac College, Bennett College, Medvance Institute, College of Office Tech

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