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Report: For-Profit Schools Better Value for Low-Income Students Than Two-Year Publics

Aiming to assure the public that for-profit higher education institutions provide as much value as public schools, researchers commissioned by a leading career college company released a report Thursday claiming that private-sector institutions increase access and student success among first-generation, low-income, and non-traditional students better than two-year public colleges.

The report, sponsored by the Santa Ana, Calif.-based Corinthian Colleges Inc., also claims that private-sector institutions do a better job in helping advance students, leading to higher wage gains upon employment and more manageable debt burden.

Recently coming under considerable scrutiny, for-profit institutions have been criticized by college access advocates and higher education officials skeptical of what they perceive to be aggressive marketing campaigns by for-profits that offer big promises to students. For-profit schools have also been accused of “misleading” students about the costs and debt they will incur.

“There has been an awful lot of discussion about our sector of higher education that has been driven by anecdote, hyperbole, and conjecture,” said Mark Pelesh, executive vice president for legislative and regulatory affairs at Corinthian Colleges. “We decided, rather than fighting with the stories, we’ll get some real research done by a reputable firm and use (U.S.) Department of Education data to get some real answers.”

A degree from the schools of well-known companies such as the Apollo Group Inc., which owns the University of Phoenix, is not cheap—about $14,000 annually, the College Board has estimated—while these companies have made billions of dollars in revenues and reaping substantial profits in the last few years.

Robert Lytle, co-director of the Education Center of Excellence at the Parthenon Group, a Boston-based global management consulting firm, said he sought to answer one central question using data from the U.S. Department of Education: Do they [private-sector schools] deliver value to students and society to reach President Obama’s degree completion goals?

Nationally, there are close to 2,800 career colleges (those that offer career-specific fields of study) and trade schools, and, in regards to underrepresented minority students, they found that:

  • For-profits enroll a greater proportion of academically “high risk” students—like those without high school diplomas—than public two-year schools.
  • They produce comparable and sometimes better positive outcomes for their students, in terms of transfer or completion of associate degrees or certificates.
  • Students experience significant wage gains—54 percent—that is equal to the boost from a community college education.
  • Graduates may incur more debt but it is manageable according to their income—a claim that counters criticism that these programs are burdensome for low-income students.

Lytle and his colleagues measured the costs of a two-year education in relation to societal impact since public schools are heavily subsidized by taxpayers. The cost for a community college student may be lower for individual students, but, once state and federal subsidies are considered, the societal expense is equal to the cost borne by students who pay on their own, the researchers claim.

“(Public colleges are) cheaper for a student but not for the state and federal government,” Lytle said.

Dr. Watson Scott Swail, president and CEO of the Educational Policy Institute, said critics often overlook the fact that for-profits do not “receive a penny from taxpayers,” yet “they are filling gaps where there aren’t seats in the public sector.”

Swail authored a report for the Imagine America Foundation that found career colleges deliver “superior student outcomes in success” for non-traditional students focusing on retention and graduation. He is currently working on another study with Kaplan University, an online for-profit institution.

Student access advocates have raised questions about the Parthenon report’s claims and methodology.

“They may be correct that it takes the same amount of money, but that’s not the point,” said Stan Jones, president of Complete College America, a national nonprofit that promotes degree completion. “Students have to pay two to three times more at for-profit schools and generally that becomes debt.”

Jones said he does not doubt that a substantial amount of these education programs are a growing part of the educational offerings in the country attracting students of color, but he “would be dubious as to whether they had greater graduation rates” than community colleges.

Private-sector trade schools claim a 64-percent minority graduation rate, nearly double the 36-percent rate at community colleges, according to the report. The report also noted that for-profits scored better in positive outcomes than community colleges driven mostly by certificate and associate’s degree production.

“Students of color are not well-served either by community colleges or proprietary schools in graduation rates,” Jones said, adding that just a quarter of first-generation, full-time community college students graduate in three years.

“But they are obviously doing something right to get people to enroll and pay a lot of money. Public colleges can learn some things from the proprietary sector. The growth would not be there if people didn’t want it,” Jones added.

Undoubtedly, college degrees increase economic opportunities, and, in both the public and private sector, graduates experienced income gains. At proprietary schools, students saw a 54-percent wage increase, while the increase was more modest, 36 percent, at community colleges, the report states.

However, students who started at community colleges already had higher incomes than their counterparts and, post-graduation, were still making more money than those who attended for-profit programs.

“There are a lot of proprietary schools, and some do a better job than others, and, for some, their prices are more reasonable,” Jones said. “It’s hard to paint them all with the same brush.”

But it’s the issues that are not in the report that most intrigue Dr. Chandra Taylor Smith of the Pell Institute for the Study of Opportunity in Higher Education. She said she is concerned about student learning experiences and how minority students are moving through remediation among other things at postsecondary institutions.

“It’s not new. We’ve known for awhile that they [low-income, underrepresented minority students] are going through for-profits and graduating at high rates,” said Taylor Smith, who will be conducting a study on DeVry University students in Chicago. “But they haven’t talked about the practices they employ for the needs of low-income students and how much of the cost is going into supporting them.”

If graduation and retention rates are higher at for-profit schools for these populations, Taylor Smith says career colleges should share their practices and produce more research that allows for critical analysis. The Pell Institute gets daily calls from college access and federal TRIO program professionals who continually ask whether they should advise their students to apply to private-sector colleges.

“I am looking forward to delving deeper. Any opportunity we have to pull back the onion on what for-profits are doing is great for the researcher and practitioner community, which wants to help and support these students,” she said.

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