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Examining Impact of Studying at 2-Year For-Profit Colleges

New research finds if a student can finish a degree at a two-year for-profit college, the financial rewards are about the same as for their peers who graduate from a public community college. But for those who fail to complete a program, dropping out from a proprietary school can be more of a setback because of the increased cost of attending.

The working paper, "The Labor Market Returns to a For-Profit College Education," by Stephanie Riegg Cellini and Latika Chaudhary was just published by the National Bureau of Economic Research, an organization based in Cambridge, Mass., and is a rare look at the quality of education in the for-profit sector.

The researchers discovered that students who enroll in two-year programs in for-profit colleges experience earnings gains in annual income between 6 percent and 8 percent—the same as that of students in public community colleges. Completing an associate degree in a for-profit bumps up their income by about 11 percent a year, which is also on par with returns experienced by public-sector graduates. Yet for-profit graduates appear to work more hours and be more likely to be employed full time compared with community college alumni, according to the paper.

If students stop short of a degree, the choice of a for-profit can have harsher financial implications than for public two-year college students who drop out, the analysis reveals.

"If we accept that the returns to education are roughly equal for for-profit and public-sector students, then our results beg the question as to whether the higher price of for-profit colleges can be justified," write the authors. "From a student's perspective, it would seem that given roughly similar returns, a lower-cost community college would likely be a better choice."

The paper notes that students may be swayed by aggressive for-profit recruiters or may not be aware of the options available at local community colleges. It could be that others don't find comparable programs at public institutions or they simply prefer the structure of the proprietary programs.

The authors conclude: "These institutions [for-profits] may indeed be worth the high price for some students— particularly those that cannot find their needs met in the public sector. However, in light of the much higher cost of a degree in the private sector, it is likely that at least some students who can find similar programs in the public sector would be better served in lower-cost community colleges."

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