Labor Market Returns of For-Profit Education

Controversy surrounding for-profit education continued over the summer, which is why a recent publication of the National Bureau of Economic Research (NBER) was so interesting as a contrast to other news.  Entitled, The Labor Market Returns to a For-Profit College Education, this NBER report offered an alternative view of the for-profit higher education sector of the education industry.


During the summer, a report from Senator Harkin and the Senate’s Committee on Health, Education and Pensions generated a good deal of discussion.  By contrast, the report from NBER late in the summer received very little attention.  The care with which it was carried out as well as its findings warrant more attention than it received.  Moreover, the report takes a factual, scientific approach – compared with the more political tone of that of the congressional committee.  Of course, scientific research has the media disadvantage of being incremental rather than dramatic.  Nevertheless, scientific research offers its own contribution to our decision-making and policy development.


The findings of the NBER research point to the value of for-profit associates degrees.  Associate degree graduates from a for-profit college have earning gains of between 6-8%.  While there were not statistically significant differences between the labor market gains of graduates of a for-profit, 2-year degree program and those of a public, community college, there was preliminary evidence that the labor market returns for a graduate from a for-profit associate degree are higher than those for a public community college graduate.


Among the additional findings of the study was that for-profit graduates work more hours after graduation than public sector graduates.  For the most part, the study found very similar degree programs in the for-profit sector and the public sector.  But there are important differences noted by the study.  For-profit degree programs are more expensive; among other differences, they lack the public’s subsidies provided to the operating and capital budgets of public community colleges.  Instead we subsidize for-profit colleges through government-based tuition loans.  Another important difference was that for-profit degree program students who do not complete their associates’ degrees may well have negative returns in contrast to the study’s ruling out negative returns for similar non-completers from the public sector.


Differences between public sector and the for-profit sector do have important policy implications.  The study notes the importance of additional research to determine whether there are important but unexplored reasons for students’ choosing a for-profit associates’ degree program over a public one.  And the study confirms what we have learned in the past from analyzing data on the attendees of for-profit colleges and universities: for-profit college students have substantially lower incomes than students in public, 2-year degree programs.  For-profit colleges are still disproportionately reaching some of our most disadvantaged students.


While not dramatic, the NBER research makes an important and too little mentioned contribution to our understanding of the higher education industry.  For-profit associates’ degrees are real contributors to our economy, especially so for lower income students.


One thought on “Labor Market Returns of For-Profit Education

  1. Labor Market Returns of For-Profit Education | InsideTrack Higher Education Blog :: InsideTrack

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