College & Workforce Readiness

Job Success of For-Profit College Grads Falls Behind Others

By Caralee J. Adams — February 23, 2012 2 min read
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As high school seniors weigh the options for training after graduation, they may want to consider the findings of a new study about the success of graduates from for-profit institutions.

Six years after they enter college, students from for-profit schools are employed at lower rates and earn less than their peers, according to the findings of The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators? by David J. Deming, Claudia Goldin, and Lawrence F. Katzthree, all from Harvard University. The researchers looked at graduates of for-profits compared with similar students at community colleges and public and private institutions.

Although the for-profit schools have greater success at retaining students in their first year and getting them to complete short programs at the certificate and AA levels, they were not as successful in the employment arena compared with similar students at other types of schools, the research found.

Graduates of for-profit colleges had earnings from work that were on average $1,800 to $2,000 less than their counterparts at other schools. This study notes the gap was likely linked to lower rates of employment. Students with training from for-profits were 4.8 percentage points to 6.7 percentage points more likely to be unemployed than those who attended other types of institutions.

The graduates of for-profits also had more debt and higher default rates when they left. The authors found that of those with $5,000 to $10,000 in student-loan debt by 2009, 26 percent of students from for-profit colleges were unable to pay their loans. Just 10 percent of those from community colleges and 7 percent of those from nonprofits had defaulted.

The study did note that for-profit colleges have contributed to workforce training and expanded and been innovative with technology. For-profit enrollment increased from 0.2 percent to 9.1 percent of total enrollment in degree-granting schools from 1970 to 2009, the authors write. These schools also serve many nontraditional students—relative to other institutions, for-profits educate a larger fraction of minority, disadvantaged, and older students.

“The for-profits have taken a large burden of increased enrollment in higher education off the public sector. The high default rates of their students on federal loans, however, increase their cost to the taxpayer,” the authors conclude in the report. “Regulating for-profit colleges is tricky business. The challenge is to rein in the agile predators while not stifling the innovation of these nimble critters.”

The authors conducted the study with the Center for Analysis of Postsecondary Education and Employment (housed and led by Community College Research Center at Columbia University). The article appears in the winter issue of the Journal of Economic Perspectives. The research used the Beginning Postsecondary Students longitudinal data from 2004 from 2009 collected by the federal government to assess outcomes of a recent cohort of first-time undergraduates.

A version of this news article first appeared in the College Bound blog.