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For-Profit Colleges in American History

Donald Trump can claim many firsts as president. He’s the first billionaire president to have hosted a reality TV show, appeared on the cover of Playboy Magazine, and starred in a Pizza Hut commercial. His rise to the presidency and his first 100 days in office have continued to roll out firsts as his circle of advisors and cabinet members have become embroiled in one-of-a-kind controversies.

Trump is also the first president in U.S. history to have owned a for-profit university. During the campaign, he was tethered to two class action lawsuits as well as a suit filed by New York attorney general Eric Schneiderman over the university. An estimated 7,000 students alleged that Trump University systematically defrauded them through false advertisements and misrepresentation. But candidate Trump’s lawyers helped delay the court date throughout summer and fall of 2016. Ten days after winning the election, he offered $25 million to plaintiffs to have the case go away. “The ONLY bad thing about winning the Presidency,” he announced, “is that I did not have the time to go through a long but winning trial on Trump U. Too bad!”

What president Trump can’t claim, however, is the first lawsuit against a for-profit university. With Trump and his circle of for-profit advocates now in the White House, a historical tour of the scandal plagued sector of American higher education will likely give us some idea of what’s to come in the years ahead.

Allegations of false advertisements and misrepresentations against these institutions in the U.S. have been around since the colonial period. They first took the form of disagreements between masters and apprentices over the terms of their tutelage. Such terms often included apprentices paying for their masters’ teachings by committing to a period of time of free labor. More familiar kinds of allegations against for-profits began to appear in the early nineteenth century. During this period, proprietary colleges offering practical business skills cropped up across the country. They satisfied a demand for practical training in an era when traditional colleges tended to prefer sticking to the classical curriculum. For-profit business colleges appeared with their penmanship and accounting classes in places like Boston, Brooklyn, and Philadelphia in the 1830s and 1840s. But the expansion continued well beyond eastern urban areas during the 1850s and 1860s. Many more could be seen from Chicago to New Orleans and from Memphis to San Jose. Government figures placed the number of these institutions by the late nineteenth century at a conservative 129. A more likely number for the period, when including fly-by-night colleges and the rest of North America, is 2,000 for-profit colleges with more than 240,000 students.

Along with all this growth in the nineteenth century for-profit college sector came accusations of “exploitation” of students. Some were misled by full-page advertisements in local and national papers. Others were misled by verbal agreements. Still others learned nothing when their proprietors absconded with tuition fees and were never seen again. Observers from England saw the rapid rise of for-profit colleges as a blight on the higher education landscape and called out proprietors for their “unprincipled” management of these companies.

A similar pattern of false claims and misrepresentation characterized for-profit professional schools at the turn of the twentieth century. Site inspections by professional societies of medicine and law revealed a substantial gap between what many of these schools advertised and what they actually provided. It led officials at the American Bar Association to reject the whole idea of for-profit education. “We believe,” stated the organization’s official position, “that law schools should not be operated as commercial enterprises, and that the compensation of any officer or member of its teaching staff should not depend on the number of students or on the fees received.” Arthur Dean Bevan, chair of the Council on Medical Education in the early twentieth century suggested the same about medical schools. Those schools conducted “solely for profit” offered the lowest grade instruction were a “menace” to the advancement of medical education.

By the mid-twentieth century, lawmakers had forgotten the lessons of previous eras when introducing the G.I. Bill of 1944. In the five years that followed, the number of for-profits increased from less than 2,000 institutions to approximately 9,000. James Bartlett Edmonson, a School of Education Dean at the University of Michigan during the fifties, led a nationwide campaign against what he and his circle described as “shysters” and “sheepskinners” in proprietary higher education. His work exposing for-profit fraud, corruption, and predatory schemes at the national level won him allies at the National Education Association and the Federal Trade Commission. Despite Edmonson’s campaign, federal reports documented millions of G.I. Bill dollars defrauded by for-profit operators.

During the final decades of the twentieth century, the reauthorization of the Higher Education Act facilitated the greatest boom in for-profit history. Institutions like the University of Phoenix began with a handful of students in 1976 and reached a peak of more than 450,000 students in 2010. This institution alone has faced a bevy class action, whistle blower, and shareholder lawsuits for practices followed and similarly litigated at Corinthian, Kaplan, Career Education Corporation, and many other for-profits of the present.

Throughout most of these eras, government officials have attempted to respond to the worst for-profit practices through new regulations or the enforcement of existing laws. But, as scholars of neoliberalism have long argued, the political turn since the 1970s toward deregulation, limited government, and expansive rights for corporations has resulted in regulatory capture. When government agencies and divisions assigned to regulate a sector are captured by the very interests inherent in the sector, the outcome is more than predictable: big benefits for special interests and little protections for the public.

The Trump administration surfed into office on a wave of public anger against the kind of special interests represented by and gained on behalf of the for-profit sector. His slogan of “drain the swamp” made the issue central to his campaign. But the administration’s hiring of Robert S. Eitel, now special assistant to U.S. secretary of education Betsy DeVos, has added to the swamp of regulatory capture. Eitel spent the eighteen months leading to his hire at the U.S. Department of Education as an executive at for-profit Bridgepoint University. His role was to organize Bridgepoint’s legal defense against the kind of government agency he now serves. He defended the company against federal investigations into deceptive practices that resulted in a $30 million settlement. As a federal government official, Eitel is now in a position to affect the course of more than a trillion dollars in public subsidies and student debt.

In cases like the for-profit college industry, history often serves as a useful guide for those wondering what lies ahead. If Trump, DeVos, and Eitel move to deregulate the sector, we can expect a predictable boom in profits, fraud, and litigation.

A.J. Angulo is a professor of education and faculty affiliate in the Department of History and Global Studies Program at the University of Massachusetts Lowell. His latest book projects include Diploma Mills: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream (2016) and Miseducation: A History of Ignorance-Making in America and Abroad (2016).