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For-profit education (also known as the education services industry or proprietary education) refers to educational institutions operated by private, profit-seeking businesses. For-profit education is common in many parts of the world, making up more than 70% of the higher education sector in India, Malaysia, Japan, South Korea, Indonesia and the Philippines.
There are three types of for-profit schools. One type is known as an education management organization (EMO); these are primary and secondary educational institutions. EMOs work with school districts or charter schools, using public funds to finance operations. The majority of for-profit schools in the K–12 sector in the United States function as EMOs, and have grown in number in the mid-2000s. The other major category of for-profit schools are post-secondary institutions which operate as businesses, receiving fees from each student they enroll. The third type of for-profit schools, which is less prevalent in the United States, are K–12 schools which operate as businesses.
EMOs function differently from charter schools created in order to carry out a particular teaching pedagogy; most charter schools are mission-oriented, while EMOs and other for-profit institutions are market-oriented. While supporters argue that the profit motive encourages efficiency, this arrangement has also drawn controversy and criticism.
Kevin Carey of the New America Foundation said in a 2010 column in The Chronicle of Higher Education that "For-profits exist in large part to fix educational market failures left by traditional institutions, and they profit by serving students that public and private nonprofit institutions too often ignore." He also noted that "There's no doubt that the worst for-profits are ruthlessly exploiting the commodified college degree. But they didn't commodify it in the first place."
In 2011 Australia had over 170 for-profit higher education institutions, taking in 6% of the total student population and expected to increase to 20% by 2020. Their qualifications are legally equivalent to those issued by the public universities, but there have been concerns raised by external audits about the quality assurance and standards in for-profit colleges.
There are also concerns over the low representation of Indigenous students, students from low socio-economic status backgrounds and students from non-English speaking backgrounds in for-profit colleges, which falls behind that in public universities. However, for-profit colleges do give a second chance to many students who would not otherwise have access to higher education. Partnerships between for-profit "pathway" colleges and public universities have also proven effective in recruiting overseas students. In this model students spend a year at the pathway college before transferring to the university for two years to complete their degree; 70% of students at the pathway colleges are foreign, going on to make up 45% of foreign students recruited by the partner universities.
The UK does not permit for-profit schools (independent schools are mostly non-profit making trusts), but there are a number of for-profit institutions in higher education. In 2013 Michael Gove, then Secretary of State for Education, was said to have drawn up plans to allow free schools and academies to become for-profit businesses, and in 2014 his successor Nicky Morgan refused to rule out for-profit schools. However, the Conservative manifesto for the 2015 General Election committed the party not to introduce for-profit schools, and after the Conservative victory, Morgan ruled out any place for-profit schools in the UK education system.
In higher education, by contrast, there are a large number of for-profit providers. A study by the Department for Business, Innovation and Skills identified 674 privately funded institutions and estimated that the majority were for-profit businesses (based on survey returns from 249 providers, of which 136 identified as for-profit). Most of the 136 for-profit colleges that returned the survey were either non-specialist (56) or specialized in business, management and accountancy (49). There are three for-profit universities in the UK: the University of Law, BPP University and Arden University, which are the only for-profit institutions with degree-awarding powers.