The Private Equity Playbook · Investigation · 2006–2016
The diploma was the product.
For-profit colleges ran on your tax dollars, spent more on recruiting than teaching, and when the biggest chains collapsed, students got the debt and the public got the bill.
FACT
§2 · Thesis
The for-profit college is the private-equity playbook run on a public subsidy: a business paid by the government per enrolled student rewards recruiting over teaching, and pushes the risk onto students and the Treasury.
The taxpayer funding, PE's ownership of the flagship (EDMC), the spend-on-recruiting model, and the Corinthian/ITT collapses are FACT. We stay precise: EDMC was PE-owned; Corinthian and ITT were publicly traded — the emblematic collapses, not the PE case.
The number
~80%of EDMC's money came from government
Title IV (Pell + federal loans), plus DoD and VA funds. In 2009, EDMC put 21.6% of revenue ($435M) into marketing and 16% ($319M) into profit — public education aid leaving as advertising and margin.
Wikipedia / EDMC filings
§5 · Graded Claim
For-profit colleges ran overwhelmingly on taxpayer money.
FACT
Private businesses financed by the public. The '90/10 rule' caps federal Title IV revenue at 90% — a ceiling the schools push against. EDMC drew ~80% of its funds from government sources (Title IV, DoD, VA). The customer paying the bill was, overwhelmingly, the taxpayer.
§5 · Graded Claim
Private equity bought the sector — EDMC is the flagship case.
FACT
In 2006, Goldman Sachs Capital Partners and Providence Equity took EDMC private in a ~$3.4B leveraged buyout, loading it with debt. Enrollment roughly doubled by 2010 as recruiting ramped, then fell when rules barred tying recruiter pay to enrollment; lenders led by KKR later converted loans into a ~90% equity stake. Buy with debt, grow enrollment, extract.
§5 · Graded Claim
The money went to recruiting, not teaching.
FACT
In 2009 EDMC put 21.6% of revenue (~$435M) into marketing/recruiting and 16% (~$319M) into profit. Dollars that arrived as education aid left as advertising and margin — the hub's extraction mechanic applied to a diploma: the public pays for schooling, the owners are paid for enrollment.
§5 · Graded Claim
When the chains collapsed, students got the debt and taxpayers got the bill.
FACT
Corinthian Colleges (2015) and ITT (2016) collapsed amid fraud findings, closing nearly overnight and stranding tens of thousands. Borrower defense — in law since 1994 but rarely used — was overwhelmed; a later settlement forgave ~$6B in loans for defrauded students, borne by the public, not the owners who profited on the way up.
§7 · Why it matters now
A public subsidy, privately extracted.
Education is the same shape as the hub's other sectors: a stream of public money a leveraged owner can capture by maximizing volume and minimizing the service. Like the nursing-home case, the customer paying is the government, the quality cut is the thing the money was for, and the people who can least afford it — students with non-dischargeable debt — absorb the loss. Billions in Title IV converted to marketing and margin, then billions more in forgiveness charged to taxpayers.
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