For Profit Colleges Raise Tuitions, But That Does Not Mean You Will Find a Job

For-profit postsecondary schools are not new to the educational landscape. In the late 19th and early 20th centuries, a multitude of proprietary institutions emerged to meet the growing demand for business, managerial, and secretarial skills in the workforce. 

However, as public high schools expanded and increased their vocational and business opportunities, enrollment at these institutions began to drop. Many — Bryant and Stratton College (1854), Globe University (1885), Strayer University (1892), Blair College (1897, now Everest College), and Rasmussen College — were able to survive the period of declining enrollment, and still exist today.

Enrollment is exploding again. According to a July report from the Senate Health, Education, Labor and Pensions (HELP) Committee, enrollment in for-profit colleges grew by 225% between 1998 and 2008. During the same period, enrollment in all degree-granting higher-ed institutions grew by 31%. This growth can be attributed to increased demand, and structural changes in federal and state grants and student-aid since the early 1990s. Students who are eligible for federal aid can use it at for-profit institutions, as long as grants and student-aid do not account for more than 90% of that institution’s revenues.

Proponents see this growth as a positive. For-profit institutions serve higher populations of “non-traditional” students — minorities and low-income students — than do their non-profit counterparts. The increased access to these education centers via local campuses, online lessons, and flexible class schedules fosters a viable option for working adults, non-traditional students, and minorities. Surely, more access to education for these groups must be seen as a societal boon. Hundreds of thousands of people have obtained degrees and certificates when they might otherwise have gone without.

Although acknowledging the necessity of for-profit institutions in meeting the growing demand for higher-ed, the Senate HELP Committee’s analysis from 2010 to 2012 is sure to point out several serious flaws. Many students are leaving the for-profit institutions without degrees or job prospects. Those who are receiving degrees are paying astronomically higher prices — 20% higher for Bachelor’s degrees and 400% higher for Associate degrees on average. Certificate programs average 450% of the cost of similar programs at comparable community colleges. To afford this education, 96% of students at for-profit institutions take out student loans, compared to only 13% for students attending community college.

For these higher costs, students may expect to achieve better results, but this is not the case. 54% of students who enrolled in 2008-2009 left without a degree or certificate by mid-2010. Another study published in the Journal of Economic Perspectives in 2012 found that six years after beginning their program, graduates of for-profit institutions are more likely to be unemployed, and can expect to earn around $2,000 less than had they received another type of education. Perhaps this is due to the fact that, on average, for-profit colleges employ ten recruitment employees for each career services staff member. Two of the largest businesses employ no career services employees whatsoever.

I would caution to take these metrics with a grain of salt. Just because students from for-profit institutions do not perform as well during, or shortly after, their program completion doesn’t necessarily mean that it is caused by the structure of these businesses. The results may be attributable to previous schooling experience, demographics, or any variety of causes that remain unseen. However, more stringent requirements are necessary for a for-profit institution to receive federal funding in the form of student financial aid. Schools who are receiving 90% of their revenues from the government should submit to regulations. Enhanced transparency about student outcomes including retention and job placement rates; proportion requirements on the number of recruiting employees versus career and loan services staff; and minimum tutoring, remediation, and financial aid standards are necessary to protect students from predatory techniques, and improve outcomes and value for students of for-profit higher-ed.