Silber says the broader initiative to crack down on schools that aggressively recruit students, cash their government financial aid checks, then leave students and taxpayers on the hook when they fail to graduate, is changing the business.

“They’re going to measure outputs, not inputs any more. Many schools have restructured their program offerings, made them shorter, made them less expensive,” Silber said. “This is very painful right now, but in the long run I think it’s very helpful for this industry.”

Whether you think it’s good news that fewer students are attending for-profits depends what you think is happening to those who don’t enroll. The sector often notes it serves disproportionately low-income, first-generation students who don’t find what they need elsewhere in higher education. So are those students now thinking twice about whether they really need to take out large student loans to attend non-profits, and asking whether they can get what they need at cheaper non-profit institutions? Or are they just dropping out of higher education entirely?

Steve Gunderson, president and CEO of APSCU, which represents the for-profit sector, says it’s the latter.

“You look at California, there’s almost 400,000 on the waiting list of the community college system,” Gunderson said. “So they’re not going there. The community colleges are loaded to the brim.”

Gunderson says that by forcing for-profits to end their open-enrollment practices, Washington is jeopardizing the president’s goal for the United States to regain its status as the world leader in higher education attainment. Once the economy recovers and students are more confident an investment in education will pay off with a job, he predicts enrollment will grow again.

Robert Shireman, – a former Department of Education official whose reputation as a foe of the for-profit sector was so fierce that the leading companies’ stock prices all surged the day he announced his departure in 2010 – isn’t quite persuaded for-profit colleges have changed their stripes.

“We still need to watch the sector carefully because there are such strong incentives to over-promise and under-deliver,” Shireman said. But he’s glad to see students apparently more aware of the risks, and to see the shift in focus at for-profits, whom he agrees have a role to play in the system.

“I would much rather see the University of Phoenix improve its quality than shut down,” he said.