Will a For-Profit Degree Get You a Job?

Even if it does, the benefit will likely be diminished by high student debt.

Students who earned degrees through the University of Phoenix, a national for-profit educational institution, celebrate their graduation in 2012.
National Journal
Sophie Quinton
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Sophie Quinton
March 24, 2014, 1:42 p.m.

Philo­sophy ma­jors at lib­er­al-arts col­leges used to have the best claim to un­em­ploy­able — or at least un­der­em­ploy­able — fu­tures. But stu­dents at for-profit col­leges and uni­versit­ies are also find­ing that their de­grees too of­ten fail to trans­late in­to well-pay­ing jobs. New data from the Edu­ca­tion De­part­ment sug­gest that for-profit schools usu­ally don’t de­liv­er on their prom­ises to pre­pare stu­dents for suc­cess­ful ca­reers. Of the more than 5,000 ca­reer pro­grams for which the agency has re­cent earn­ings data, 72 per­cent offered by for-profits pro­duce gradu­ates who earn less than high school dro­pouts. (The com­par­able fig­ure for pro­grams at pub­lic in­sti­tu­tions is 32 per­cent.)

As it pre­pares to reg­u­late ca­reer pro­grams, the fed­er­al agency has col­lec­ted and pub­lished av­er­age post-gradu­ation earn­ings and stu­dent-debt in­form­a­tion for rel­ev­ant as­so­ci­ate’s de­grees and lower-level cer­ti­fic­ates. The data don’t in­clude oth­er factors that in­flu­ence em­ploy­ment, like stu­dent demo­graph­ics, the strength of the loc­al eco­nomy, or pri­or work ex­per­i­ence. But they may provide the most de­tailed pic­ture yet of which ca­reer cre­den­tials are valu­able to em­ploy­ers and af­ford­able for stu­dents. It turns out that the short-term pro­grams that for-profit stu­dents are most likely to com­plete are also the most likely to fail the Edu­ca­tion De­part­ment’s pro­posed “gain­ful em­ploy­ment” meas­ures.

“You’ve got a bunch of gradu­ate pro­grams that by and large look OK. You’ve got some bach­el­or’s pro­grams that look OK. Where you see the high fail­ure rate is the as­so­ci­ates’ and cer­ti­fic­ate pro­grams,” says Ben Miller, seni­or policy ana­lyst in the edu­ca­tion policy pro­gram at the New Amer­ica Found­a­tion, re­fer­ring to for-profit edu­ca­tion.

The gradu­ates who are hampered by the worst post-gradu­ation earn­ings are those who at­tain cre­den­tials not re­quired by law or by in­dustry stand­ards — a cer­ti­fic­ate in mas­sage ther­apy, for ex­ample. Stu­dents fare best when they com­plete pro­grams for re­quired cre­den­tials, such as a nurs­ing de­gree. The catch is that those high­er-level de­grees as­so­ci­ated with great­er in­come also weigh down stu­dents with more debt.

Here’s one ex­ample from the Edu­ca­tion De­part­ment’s data: In San Ant­o­nio, Texas, hold­ers of li­censed prac­tic­al-nurse cer­ti­fic­ates from for-profit Ka­plan Col­lege can ex­pect to earn $36,730 and owe $1,759 in stu­dent-loan pay­ments per year, on av­er­age. Hold­ers of the same cre­den­tial from St. Phil­lips Col­lege, a pub­lic two-year in­sti­tu­tion, can ex­pect to earn $42,760 and owe $382 per year. 

Des­pite typ­ic­ally high­er costs and levels of stu­dent debt, for-profit edu­ca­tion in­sti­tu­tions make up a fast-grow­ing sec­tor that serves 13 per­cent of col­lege stu­dents, most of whom are seek­ing a cer­ti­fic­ate or as­so­ci­ate’s de­gree. They range from small out­fits like the Flint In­sti­tute of Barber­ing in Michigan to massive pub­licly traded com­pan­ies like the Uni­versity of Phoenix. 

In the stu­dent pop­u­la­tion they serve and the pro­grams they of­fer, for-profits most re­semble com­munity col­leges. Sixty-three per­cent of stu­dents at­tend­ing for-profit in­sti­tu­tions have low enough in­comes to qual­i­fy for fed­er­al Pell grants, ac­cord­ing to the Con­gres­sion­al Budget Of­fice. The sec­tor also en­rolls dis­pro­por­tion­ate num­bers of Afric­an-Amer­ic­an and His­pan­ic stu­dents.

But for-profits charge tu­ition like private not-for-profits, while of­fer­ing less in­sti­tu­tion­al fin­an­cial aid. Low-in­come stu­dents who might pay noth­ing out-of-pock­et at a pub­lic in­sti­tu­tion, thanks to grant aid, pay about $8,000 in tu­ition at a for-profit school, ac­cord­ing to a 2011 re­port from The Col­lege Board. Stu­dents take out loans to make up the dif­fer­ence. Ac­cord­ing to the Edu­ca­tion De­part­ment, for-profit stu­dents ac­count for about 31 per­cent of all stu­dent loans and nearly half of all loan de­faults.

Le­gis­la­tion dat­ing to the 1960s com­pels the Edu­ca­tion De­part­ment to make sure that fed­er­al fin­an­cial-aid dol­lars only flow to ca­reer pro­grams that res­ult in “gain­ful em­ploy­ment.” The stand­ard — which has nev­er been defined — ap­plies to al­most all pro­grams offered by for-profit in­sti­tu­tions and to cer­tain as­so­ci­ate’s de­grees and cer­ti­fic­a­tions at pub­lic and private not-for-profit in­sti­tu­tions.

The Obama ad­min­is­tra­tion has been par­tic­u­larly alarmed by the high stu­dent-debt and loan-de­fault rates as­so­ci­ated with for-profit col­leges. It wants to define “gain­ful em­ploy­ment” us­ing two meas­ures: the share of a gradu­ate’s in­come that goes to stu­dent loan pay­ments, and the rate at which gradu­ates de­fault on their fed­er­al loans.

“In some sense, the for-profits need to be do­ing bet­ter to be as good of a deal,” says Dav­id De­m­ing, an as­sist­ant pro­fess­or at the Har­vard Gradu­ate School of Edu­ca­tion. “Be­cause if you’re bor­row­ing three times as much money, and you’re get­ting the same out­come, well then it’s worse, right?”

So far, say re­search­ers, we don’t know much about the earn­ings pay­off as­so­ci­ated with for-profits. Most in­de­pend­ent re­search on the sec­tor has re­lied on sur­vey data, and com­par­ing for-profits to oth­er sec­tors is tricky be­cause for-profits of­ten of­fer de­grees that aren’t avail­able else­where. A 2012 study co-au­thored by De­m­ing found that gradu­ates of for-profits — after con­trolling for stu­dent char­ac­ter­ist­ics — earn less than com­par­able gradu­ates of oth­er schools, mostly be­cause for-profit gradu­ates are less likely to be em­ployed. And a 2013 Bo­ston Uni­versity study found little pay­off to cer­ti­fic­ates from any kind of in­sti­tu­tion, ex­pect for those cre­den­tials re­quired for cer­tain jobs. 

Stephanie Rigg Cel­lini of George Wash­ing­ton Uni­versity and Latika Chaud­hary of Scripps Col­lege have cal­cu­lated that for-profit as­so­ci­ate’s de­grees give stu­dents a 4 per­cent in­crease in earn­ings per year of edu­ca­tion. But stu­dents would need an in­crease of 9 per­cent to make their de­grees worth the cost. 

The for-profit in­dustry says it’s be­ing un­fairly tar­geted. “If the reg­u­la­tion were ap­plied to all of high­er edu­ca­tion, pro­grams like a bach­el­or’s de­gree in journ­al­ism from North­west­ern Uni­versity, a law de­gree from George Wash­ing­ton Uni­versity Law School, and a bach­el­or’s de­gree in so­cial work from Vir­gin­ia Com­mon­wealth Uni­versity would all be pen­al­ized,” Steve Gun­der­son, pres­id­ent and CEO of the As­so­ci­ation of Private Sec­tor Col­leges and Uni­versit­ies, said in a state­ment.

All types of col­leges are in­creas­ingly un­der pres­sure to prove that they’re worth rising tu­ition prices. From the Obama ad­min­is­tra­tion’s pro­posed col­lege-rat­ing sys­tem to state per­form­ance-fund­ing for­mu­las, poli­cy­makers are push­ing to make sure tax­pay­er re­sources go to in­sti­tu­tions that gradu­ate stu­dents in a reas­on­able amount of time, at a reas­on­able cost, and with a reas­on­able chance of get­ting a de­cent-pay­ing job.

The Edu­ca­tion De­part­ment’s pro­posed gain­ful em­ploy­ment stand­ard may nev­er come in­to force. Rule-mak­ing has dragged on for years, delayed in part by fed­er­al court cases. But le­gis­lat­ive ef­forts are in­creas­ingly mak­ing pub­lic stat­ist­ics like post-gradu­ation earn­ings for a wide range of in­sti­tu­tions. That’s the kind of in­form­a­tion pro­spect­ive stu­dents in search of well-pay­ing jobs sorely need to know. 

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