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
Add to Briefcase
See more stories about...
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. 

What We're Following See More »
Congressional Budget Office Scores House Trumpcare Bill
44 minutes ago

The nonpartisan Congressional Budget Office has released its score of the House-passed American Health Care Act, which would replace Obamacare. According to the CBO, the bill would reduce the deficit by $119 billion by 2026, while leaving 14 million more Americans uninsured in 2018 than under current law, a number swelling to 23 million by 2026. Further, insurance premiums would balloon 20 percent in 2018 and five percent in 2019 before the waiver provision in the legislation would kick in. The provision allows states to apply for waivers and permit insurers to offer skimpier plans, which would likely entice younger and healthier individuals to buy health insurance while potentially pricing older and less healthy Americans out of insurance plans. House Republicans approved this bill in late April without waiting for the CBO score.

Mnuchin Looks To Avoid Debt Ceiling Fight
2 hours ago
Graham Rejects Trump’s Budget In Hearing
2 hours ago

Republican Sen. Lindsey Graham said Wednesday during a Senate Appropriations subcommittee hearing that President Donald Trump's budget is literal more than recycling bin material. "The budget proposed by the president doesn't have a snowball's chance in hell of passing," Graham said. Graham had previously opposed the budget over its nearly 30 percent cut to the budget of the State Department. The budget slashes spending on domestic priorities while increasing military spending.

McConnell Not Sure How To Get 50 Votes For Health Care
2 hours ago

Senate Majority Leader Mitch McConnell said Wednesday that he doesn't yet know the formula towards gaining passage of an Obamacare replacement in the Senate. "I don't know how we get to 50 (votes) at the moment. But that's the goal," McConnell said. The House passed an Obamacare replacement bill which has been widely seen as dead on arrival in the Senate, and McConnell has put together a working group of Republican Senators working towards creating health care legislation which could gain the support of at least 50 Senators.

Transcript Of Trump, Duterte Phone Call Leaks
7 hours ago

The transcript of a phone call between Donald Trump and Philippine President Rodrigo Duterte was leaked and it shows Trump referring to North Korean dictator Kim Jong Un as a "madman with nuclear weapons" and praising Duterte, saying he was doing an "unbelievable job on the drug problem." For context, Duterte has presided over a vicious and genocidal campaign of extrajudicial killings within his country which has led to the murder of thousands of expected drug dealers and users. Trump also told Duerte to take care of himself and promised that the U.S. would "take care of North Korea."


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.