Florida's Attorney General Bill McCollum is investigating practices of five colleges run by Education Management , Corinthian Colleges , Washington Post and Apollo Group.
A separate probe by the Government Accountability Office found that enrollment counselors at 15 for-profit colleges had lied or misrepresented programs, and encouraged applicants to make false statements on financial-aid applications. Critics say the industry functions as a giant marketing machine that targets unsophisticated consumers and poses a real danger.
In a report this month, Senator Tom Harkin, Chairman of the Health, Education, Labor and Pension Committee voiced concerns about the share of military education funds going to for-profit schools with questionable outcomes.
“This report raises serious questions about whether some for-profit education companies view providing education to our service members and veterans as incidental to ensuring a robust profit for their company and their shareholders,” said Harkin.
The Obama administration has been raising pressure on for-profit education providers. The Education Department wants to tie distribution of federal student aid to school's ability to demonstrate that it prepares students for "gainful employment", which is a somewhat abstract measure of graduate's ability to repay student loans.
The final proposal, which is expected to restrict the flow of taxpayer dollars to for-profits whose results do not meet certain metrics, is expected early next year.
For now, the schools are fighting tooth and nail to water it down. But they also realize that things will have to change.
Many for-profit education companies, including Apollo and the Washington Post’s Kaplan Education, are already making adjustments to their business model and concede that the changes will eat into their profits, at least in the near term.
Here to Stay
There is still a lot of uncertainty surrounding the industry. But some things are clear.
For-profit colleges are here to stay. The demand for higher education continues to grow, and traditional schools cannot meet it alone.
"In the United States of America, where fewer than 30 percent of adults have bachelors degrees, I can't envision a way to ensure that those who were left behind by the traditional institutions, have an opportunity to realize the American Dream other than through programs like ours," President of Strayer University, a subsidiary of Strayer Education , Sondra Stallard told CNBC.
Education Secretary Arne Duncan, who is critical of the industry, has said that for-profits are important to President Obama's goal of increasing college graduation rates in the United States by 2020.
So as more money is expected to flow into the higher education and to for-profit schools, questions about quality and accountability remain critical. Thus far, the industry has not been eager to answer them.
Watch the premiere of "Price of Admission: America's College Debt Crisis," Tuesday, December 21 at 9pm ET on CNBC.