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The Unacknowledged Value of For-Profit Education

issue brief

The Unacknowledged Value of For-Profit Education

By Judah Bellin April 11, 2013
EducationPre K-12

For-profit education is the fastest-growing sector of the higher-education industry. However, politicians and journalists have highlighted trends that they say should make students think twice before attending for-profit colleges. These include:

  • Poor graduation rates, as only 22 percent of students at for-profits completed college in six years, compared with 65 percent of students at nonprofit private schools and 55 percent of students at nonprofit public schools;
  • Higher loan-default rates, as 25 percent of students at for-profits default on their loans—the figures for their peers at nonprofit private and public schools are 7.6 and 10.8 percent, respectively;
  • Higher likelihood of unemployment for alumni of for-profit colleges.

However, policymakers should not overlook the many positive aspects of for-profit colleges. For-profits are notable for educating students who are underrepresented at traditional campuses. For instance:

  • African-Americans and Hispanics constitute 22 and 15 percent of students in the for-profit sector, respectively, though they make up only 13 and 11.5 percent of all students;
  • 75 percent of students attending for-profits are financially independent;
  • 54 percent of dependent students attending for-profits have incomes below $40,000;
  • 65 percent of students attending for-profits are aged 25 and older, compared with much smaller percentages at four-year public colleges and two-year colleges.
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    Because for-profit colleges are not bound to the often-inflexible agendas of tenured faculty, alumni, or trustees, they can more easily adapt course offerings to current labor demand. As a measure of their success, when for-profits are compared with traditional community colleges (their closest market competitors), they often perform better: one estimation model shows that students enrolled in certificate programs are about 9 percent more likely to obtain certificates, and 4 percent are more likely to obtain associate' degrees than students attending community colleges.

    federal government should seek to preserve the good aspects of for-profit colleges while minimizing the bad ones. To that end, policymakers should change the federal student-loan program so that substandard institutions are hard-pressed to stay in business. To ensure that its investment in higher education is worthwhile, the government should apply any such regulation to all sectors of the higher-ed industry, be it for-profit, nonprofit, public, or private.

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