‘Not something that we’ve ever seen before’: As Trump takes aim at higher ed, private equity could wreak more havoc

All of a sudden, banks might be willing to lend to “people who are trying to become doctors or lawyers. But people who want to become teachers? Maybe not,” she says. “People just need to be really clear-eyed about the fact that this is not something that we’ve ever seen before.”

Julia Barnard, who was fired last month from her role as the student loan ombudsman at the Consumer Financial Protection Bureau, agrees that there may be “very risky waters” ahead. (Already, private equity is gobbling up student housing around the country.)

So what will happen if more of academia is privatized? Actually, we’ve seen this movie before. And it didn’t end well.

Alyssa Brock is one of many students whose life was reshaped by private equity. In 2010, Brock was in her last semester of college at The New England Institute of Art, or NEIA, in Brookline. And she landed an interview at a small design firm, in what could have turned out to be a real break.

But it wasn’t a break. It was a disaster.

“I felt like I had no idea what they wanted me to do,” Brock remembers. She was trying to do something on Photoshop, she says, “and I’m like: ‘Why am I fumbling?‘”

At NEIA, she says, “quality wasn’t incentivized and prioritized.” She notes that “instruction often felt threadbare. ... They were showing us YouTube videos. And the teachers varied wildly in quality. There were some who definitely knew what they were doing ... And there were some teachers where it was like: ‘Why are you here?‘”

Brock knew little about the history of NEIA, but, as she later learned, the for-profit school’s parent company had been acquired in 2006 by Rhode-Island-based private equity firm Providence Equity Partners, along with Goldman Sachs and other firms. It was part of a wave of high-finance takeovers in higher education; in the 1990s and early 2000s, private equity firms acquired nearly 1,000 for-profit colleges.

Though we tend to hear far more about its effect on health care, private equity’s impact on higher education has been profound.

Using data from nearly 1,000 schools with private equity ownership, a 2018 paper from the National Bureau of Economic Research found that, while “private equity buyouts lead to higher enrollment and profits” — great for investors — they also led to a host of downsides. Tuition went up. Graduation rates went down (at NEIA, they declined from over 60 percent to less than 35 percent). Less money was spent on educating students. And graduates earned less post-graduation.

Once, for-profit schools — which were often locally and family-owned — aimed to get students through two or four-year degrees, focused on a particular vocation, and place them in local jobs, according to Charlie Eaton, a professor at the University of California Merced and author of "Bankers in the Ivory Tower." Then, too often, they were “run into the ground” by private equity, says Eaton, a coauthor of the NBER paper.

NEIA’s parent company spent more on marketing than teaching. It boosted enrollment to more than 140,000 students nationwide but ultimately went bankrupt, leaving hundreds of thousands of students in debt and causing NEIA to shut its doors in 2017.

Sabrina Howell, a professor at NYU Stern School of Business and a coauthor of the NBER paper, points out that “private-equity-owned schools had double the share of employees in sales and marketing relative to other for-profits, and four or five times the share of a nonprofit or public school.” There was “really pretty compelling evidence,” she says, “that these buyouts were not in the interest of students.”

Many of the schools acquired by private equity and venture capital failed in the 2010s. But in the 2020s, new avenues for investment — including online education — have opened up. And corporate money now has the distinct advantage of being sheltered by marquis names — many of which are under duress.

“What you’re seeing is not private equity in a consumer-facing brand,” argues Connor. “You’re seeing it in ed-tech. You’re seeing it behind the scenes, like [in] online program management, enrollment management, and, to an extent, marketing.”

Connor emphasizes that, for these companies and their investors, growth is imperative. Take Cerberus Capital Management, a private equity firm that invested in both Steward Health Care and ITT Technical Institute, a national chain of more than 100 colleges. When the Project on Predatory Student Lending represented former students of ITT, following the chain’s bankruptcy in 2016, they obtained access to internal documents from Cerberus.

The school’s approach, she says, was: “We’re going to force [students] into hybrid online programs at facilities where we know that the internet is not up to par ... So our students are going to go to McDonald’s to access Wi-Fi to take the classes.” Connor argues, “they just didn’t care that they were offering content that their students literally could not access.”

Phil Hill, an analyst focused on educational technology, says private equity has become a force in online program managers (OPMs), companies that help brand-name schools run online classes.

Hill says OPMs make the pitch this way: “Hey, you nonprofit university with your great reputation, you don’t know how to do online.” He notes that “a traditional school is set in their ways. Traditional marketing. People start in September.” But, he says, online is “a different game.” You need to be more aggressive. And “you’d better be answering the phone on Saturday at 11 p.m.”

Between 2009 and 2021, the private equity- and venture capital-backed company 2U made that pitch well. It struck impressive deals, partnering with Georgetown University, the University of Southern California, and the University of North Carolina. In 2021, 2U spent $800 million to acquire edX, an online education platform created by MIT and Harvard.

Then things started to unravel. In 2023, a lawsuit accused USC of using deceptive practices in the online Master of Social Work degree it ran with 2U. The Project on Predatory Student Lending, which helped file that lawsuit, alleged that “USC hides that its online MSW program is outsourced almost entirely to a for-profit education company, 2U, Inc. Although USC claims that its online MSW program is exactly the same as the campus-based program, it is not.”

About six months later, USC ended its agreement with 2U. 2U filed for bankruptcy in 2024. The lawsuit is ongoing.

Connor says that private equity sells itself as having an answer to the woes of higher education, “which perceives itself to be under threat, partly because of demographic cliffs, partly because public sentiment is questioning the value of higher education, partly because of culture war things. ... So the easy answer that’s sold to higher education is that all they need to do is offer programs to meet students where they are, and that they can just enroll students. It’s just enroll, enroll, enroll.”

In 2023, Massachusetts Senator Elizabeth Warren expressed worries about the role of online program managers in higher education, writing to then-Secretary of Education Miguel Cardona about “predatory practices used by OPMs that contribute to rising student debt loads.”

Such debt loads can be crushing, as Alyssa Brock discovered. Brock comes from a small town in Maine, and wanted to stick it out and finish her degree at NEIA. But given the questionable quality of instruction, and her ever-increasing bills, she ended up leaving in her last year.

Brock says she took out about $80,000 in federal loans, about $100,000 in private loans, and tens of thousands in Parent PLUS loans. Her family, she says, is “lower-working class. We’re not poor, but we’re definitely not rich ... And then they started throwing student loans at me and my parents.” She counts herself very lucky to have had most of her loans dismissed under various government actions.

After leaving NEIA, Brock worked at Forever 21 before moving back in with her parents and getting a front-desk job at an animal medical center. She says she’d love to attend community college someday. And she even thinks about getting back into creative work, though she says her NEIA experience “kind of killed the passion for me.”

Follow Kara Miller @karaemiller.