NEW YORK, NY (February 21, 2012)—Students who attend for-profit colleges are less likely to be employed and have lower earnings six years after enrolling than similar students who attend public and not-for-profit colleges, according to a new study by authors affiliated with the Center for Analysis of Postsecondary Education and Employment (CAPSEE). They also carry heavier debt burdens and are more likely to default on their student loans.
Over the past decades, for-profit colleges have experienced explosive growth in enrollment, with numbers increasing from 18,333 in 1970 to 1.85 million in 2009. Currently, for profit students make up 13 percent of all college attendees, up from 5 percent in 2001.
However, until now, student outcomes for these institutions have been poorly understood, not least because the students they serve are not always analogous to those who attend public and non-profit colleges. The analysis found that for-profit colleges serve a larger fraction of students who tend to struggle in college: minority, older, and independent students who are disproportionately single parents, have lower family incomes and are twice as likely to have a GED.
To ensure comparable results, the study—which used data from the 2004 to 2009 Beginning Postsecondary Students (BPS) longitudinal survey—controlled for observable student characteristics such as income, age and ethnicity. The analysis indicated that students who attend for-profit schools are more likely to persist through their first year and to earn certificates and associate degrees than their counterparts at community colleges. However, despite these higher completion rates, for-profit students are more likely to experience long term unemployment and report less satisfaction with their education in the six years after they enroll.
The poor employment and earning outcomes of for-profit students may explain their high rates of loan defaults. Currently, 26 percent of all federal student aid goes to for-profit tuition, making up three quarters of the sector’s revenue. The researchers found that almost 25 percent of for-profit students default on their loans within three years. This rate is 10.5 percent higher than that of similar students who attend public or non-profit institutions and accounts for almost half of all student loan defaults.
For more information and to read the complete study, go to http://capseecenter.org/for-profit-nimble-critters
The study also appears in the winter 2012 issue of Journal of Economic Perspectives.