With increasing scrutiny from lawmakers, regulators, consumer advocates and the general public, the past five years have been hard on a for-profit college industry that had enjoyed years of happily feeding at the federal student aid trough. There have been changes to schools’ often excessive advertising budgets, damning reports of abuse, and soon-to-be-implemented rules requiring for-profit programs to demonstrate their effectiveness. The fractures in a business model that has attracted some of the biggest names in investment have become more evident, especially when comparing previously robust enrollment numbers with the most recent figures.

Last week, Apollo Group, owners of the largest for-profit college in the United States – the University of Phoenix – revealed that enrollment at the college had declined once again to 214,000 students.

While having more than 200,000 students might seem like a large customer base, it pales in comparison to the estimated 470,800 students enrolled at Phoenix in 2010 when the Senate Health, Education, Labor and Pension Committee released a wide-ranging report [PDF] on the for-profit industry, effectively pulling back the curtain on to reveal an array of abuses.

On a call to investors, Apollo Education Group CEO Greg Cappelli blamed the continued decline in enrollment on the transition the career college has undergone and a decrease in marketing expenditures.

“University of Phoenix is going through a transition, but we’re building a stronger foundation for future success,” Cappelli said on the call. “We’re working to build a much more competitive and efficient university for the long-term.”

Although investor reports show University of Phoenix has indeed decreased its marketing budget in recent years by a few million dollars, the company continues to regularly appear on television screens around the country, including  its its prominent placement as the site of the 2015 Super Bowl.

Despite the ever-present appearance of University of Phoenix, Cappelli suggested on the call that the decline in enrollment of about 12.9% from 2013 to 2014 was directly linked to an increase in marketing by competitors, but that may be a case of misplaced blame.

Number Are Down All Around

If, as Phoenix contends, it is being outspent on marketing by its competition, you’d expect to see increased enrollment at these other schools, and that isn’t exactly happening.

In fact, the top six for-profit companies by enrollment – the University of Phoenix included – identified by the HELP Committee report have each faced a declining number of students in the past five years, often after facing a barrage of issues such as federal lawsuits and investigations that often precipitated some campus closings.

For example, Education Management Corporation – the third largest career college company reviewed in the HELP report and operator of Argosy University, Brown Mackie College, The Art Institutes and others – lost nearly 46,000 students over the past five years.

Back in 2010 the company, which is partially owned by Goldman Sachs, had an enrollment of 158,000 students. Now, according to its latest available SEC filing [PDF], enrollment stands at about 118,090 students. In the last year alone, the company has lost about 7% of its enrollment, down from 127,360 students in 2013.

The loss of students for EDMC may be a side effect of the increased scrutiny the company received in 2011, when it was sued by the U.S. Department of Justice and four states. That lawsuit accused the company of violating a federal law against paying recruiters based on the number of students they manage to enroll.

Likewise, DeVry Inc., the operator of DeVry University and a number of smaller career colleges, hasn’t gone through the last five years unscathed.

Back in 2010, the company counted an enrollment of 130,375 students. Today, that number has fallen slightly to 120,713 students, according to its February 2015 investor update [PDF].

Although the company lost the least number of students over the past five years – less than 100 in the last year – it has undergone changes including the opening and closing of several locations, as well as a transformation of its leadership team.

Of the schools with the highest enrollment in 2010, Career Education Corporation has likely closed the most schools, reducing its enrollment figures substantially.

The company, which operates American InterContinental University, Briarcliff College and Colorado Technical University, had an enrollment of 118,200 students in 2010. That number fell to 41,400 students according to its latest investor report [PDF]. In just the last year, the company has lost 3,600 students.

Career Education Corporation’s decreased enrollment could likely be tied to the fact that the company closed 23 of its 90 schools in 2012. Most recently the company announced its intent to divest its Le Cordon Bleu brand of cooking schools.

Many of CEC’s school closures followed the company’s regulatory and legal challenges stemming from accusations it inflated job placement rates for its graduates. Another factor driving away students could be the fact that several of the company’s schools lost eligibility for certain federal and state loans as a result of the accusations.

With the exception of Corinthian Colleges Inc. – which we’ll get to in a minute – the for-profit college chain that underwent the most notable changes in the last five years is arguably Kaplan University.

Until Oct. 2013, the Washington Post Company – the corporation that owned The Washington Post newspaper at the time – was behind Kaplan University. Then Amazon CEO Jeff Bezos bought the newspaper portion of the Washington Post Company and the business that remained became Graham Holdings Company.

In addition to the being purchased by another parent company, the University ceased enrollment at several locations including physical campuses in Atlanta, Phoenix, Cleveland and Jacksonville.

Understandably all of the changes have driven down enrollment numbers. Back in 2010, the career college’s enrollment reached 112,000. It currently sits at around 56,735 students, according to Graham Holdings 2014 annual report [PDF]. In the last year alone, the company’s enrollment decreased by about 3,498 students.

As for University of Phoenix, the college had an enrollment of 470,800 students in 2010 and those number have steadily declined ever since, thanks in part to school closings and several federal and state-level investigations.

In one instance in 2011, the company closed 115 locations affecting 13,000 students in an effort to save some $300 million.

Of course, when talking about the woes facing for-profit colleges and their parent companies, we’d be remiss not to mention the ongoing collapse of Corinthian Colleges Inc., which was the second largest for-profit chain in 2010.

At the time of the HELP report release, the company – operators of Heald College, Everest University and WyoTech – counted about 113,800 students on its enrollment roster. Now, according to the last available investor report filed in May 2014 [PDF], the company had an enrollment of 74,498.

However, that number is likely to decrease dramatically following the company’s very public downfall, which started in the summer of 2014 when the company entered into a standoff with the Department of Education regarding student aid funds. In the end, CCI agreed to sell or close a majority of its campus.

In February, it completed the sale of 56 campuses to Education Credit Management Corporation. Since then, the company has closed its campuses and filed for bankruptcy in Canada and been delisted from Nasdaq.

Will Things Only Get Worse?

While the enrollment figures at these top for-profit schools look decidedly inferior to their previous numbers, things could likely get worse when new federal Gainful Employment Rules kick in this summer.

In fact, Graham Holdings – the owner of Kaplan University – specifically warns investors that enrollment could be adversely impacted by the changes.

“The gainful employment regulations will mean fewer students, fewer degrees, much less attention to low-income student and much less innovation,” Graham Holdings states in its annual report.

Under the new rules [PDF], for-profit colleges will be at risk of losing their federal aid should a typical graduate’s annual loan repayments exceed 20% of their discretionary income, or 8% of their total earnings.

Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.

So for example, say the typical recent graduate of a career education program earns $25,000. That student would need to average annual student loan payments less than $2,000, or the school would be at risk for losing federal financial aid.

While Graham Holdings tells investors that Kaplan is taking steps to address the new compliance standards, “there can be no guarantee that these measures will be adequate to prevent a material number of programs from either failing the [Gainful Employment] tests or being put on warning status.”

As a result, the company could “eliminate or limit enrollments in certain educational programs at some or all of its schools…having a material adverse effect on KHE’s revenues, operating income, cash flows and the estimated fair value of the reporting unit.”

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