Providence Equity Partners Inc. and Goldman Sachs Group Inc.'s investment arm have agreed to purchase Education Management Corp. for $3.4 billion, Education Management said, as increased access to federal funding improves the prospects of for-profit trade schools and universities.
Education Management runs 72 primary campuses across the U.S. and Canada, training its 72,000 enrolled students in fields such as fashion, psychology and Web-site design. It also runs a small but growing operation providing online instruction.
For-profit education has become a growth business in the U.S., as tuition costs at traditional nonprofit colleges and universities soar. New students also are choosing to take their courses online, a more convenient and more profitable method. [...]
Like the media industry, the for-profit education business is seeking to benefit from new distribution methods. As classes move online, education companies gain the ability to sell their content to a wider number of customers. The costs of adding students decline in that environment, making the profit margins more attractive.
But the transaction also comes at a time when for-profit colleges and universities -- which generate almost $18 billion in annual revenue -- face mounting regulatory scrutiny for issues from overly aggressive sales tactics to the quality of their academic offerings. In many cases, traditional colleges and universities have refused to accept credits students earn at for-profit schools, arguing their academic standards aren't high enough. Meanwhile, the regional commissions that approve course work at traditional schools have generally refused to do so with for-profit schools.
And, like the media industry (think cable news and the big dailies) and of course the Republican party, the for-profit education industry has learned that there is an enormous amount of profit to be gained by purveying total crap.
Even if nonprofit schools are often inefficient, at least we know their primary priority isn't the strip-mining of students' (and parents') wallets.
Why would Goldman Sachs be willing to pay over $47,000 for each enrolled student? Because they're more interested in extracting money from students than educating them. The unique combination of heightened investor profit and lowered academic standards prove the point.