BROOKINGS: Does a for-profit college education pay off?

Career College Central Summary:

As a number of scholars have pointed out, on average, college still pays—even in light of the relatively high debt levels we see today. The lifetime earnings gains from attending public and non-profit four-year colleges and community colleges have been shown to be consistently high enough to outweigh the costs of attendance. But very few studies have asked whether this is also true in the rapidly-growing for-profit sector.
In a recent paper, Latika Chaudhary and I assess the earnings gains to associate’s degree programs in for-profit colleges. After carefully controlling for student background characteristics (including unobservable characteristics like ability and motivation), we find that for-profit students who work both before and after attending experience a bump in earnings around four percent per year of education—or 10 percent total (since a typical associate’s degree take 2.6 years to complete)—relative to high school graduates who do not attend college. The annual earnings gain increases to seven percent when we add in the slightly higher probability of being employed post-education. We find suggestive evidence that students who drop out of for-profit programs see virtually no return and those who complete their associate’s degrees have higher returns—around eight percent per year.
Still, these numbers are quite a bit smaller than the returns found in other sectors (upwards of 12 percent per year for community college associate’s degree students) and suggest that many for-profit students would fare better in public community colleges, where earnings gains may be higher and tuition is less than a quarter of the price.
Of course, not all students may find their needs met in the public sector. For-profit colleges may offer shorter (or non-existent) waitlists, more evening or online classes, or specialized programs not offered in the public sector. The most important question then becomes whether for-profit students’ earnings gains are sufficient to offset the high cost of attendance (or essentially, the return on investment).

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BROOKINGS INSTITUTION