Students at For-Profit Colleges Earn Less, Study Says

Applicants deciding between for-profits and nonprofits should also weigh their loan packages.

March 23, 2012 RSS Feed Print

Prospective students who are considering nonprofit schools—whether public or private—and institutions such as University of Phoenix and DeVry University that operate as for-profit businesses may be discouraged from enrolling at the latter type of schools, according to a recent study from the Center for Analysis of Postsecondary Education and Employment at Teachers College, Columbia University.

The report—titled "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators"—suggests that alumni of for-profit colleges tend to get lower salaries and are less enthusiastic about their degrees six months after enrolling than are their peers at nonprofit schools.

"I think one of the messages of the paper is that there's a lot more variation in for-profit colleges. It's more of a 'buyer beware' kind of sector than community colleges," says David Deming, a coauthor of the report and assistant professor of education and economics at Harvard University's Graduate School of Education. "There are schools that are doing really well, and there are schools that have shockingly high rates of loan default."

[Read about government crackdowns on for-profit schools.]

It's important for applicants considering for-profit schools to make sure they understand not only the nature of the grants and loans in their financial aid packages, but also from whom they're borrowing, Deming says. Students may not be aware that they're borrowing from the government rather than private loans through the for-profit school, he warns.

"I'm not sure that many people know that basically—and this is a slight exaggeration—only death discharges you from your obligation to pay your federal student loans. They're very hard to get rid of," he says. "It's possible that students don't always understand the gravity of their undertaking."

[Learn about a fall 2011 report on college student debt.]

Jim Erickson, who holds an M.B.A. from Western Governors University and a B.S. from University of Phoenix, says his fellow WGU alumni have been discussing the report that Deming cowrote.

"I feel more value in my degree from the nonprofit than I do from my bachelor's degree from the for-profit institution, but maybe it's because I feel that they were doing me a service more than they were collecting my check," says Erickson, a vendor manager for a cash management equipment company in Southern California.

One experience at Phoenix that particularly convinced him the school was run as a business was the disappearance of an instructor two classes into a nine-week course, Erickson says. He and the other dozen students in the course approached university staff asking for help.

"We just didn't get any real response," he says. "The overall feel of the organization of the University of Phoenix was just collecting the check and moving on to the next class." (The professor was eventually fired, and another instructor filled in for the rest of the semester.)

[Check out etiquette tips for E-mailing professors.]

Tags:: student loans,; colleges,; education,; debt,; students

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I have started, run and sold my own business, attended traditional brick and mortar schools, for profit brick and mortar schools and online for profit schools. I have worked for several Fortune 500 companies and many have been my clients.
My degrees are from for profits. One degree is from a brick and mortar format and one from an online format.
The key to viability of a degree is the effort of the student just as career success is primarily due to the effort of the individual. If a school is regionally accredited then for profit or nonprofit makes little difference except with the top tier schools. The best are the best for a reason. Beyond the best of the best, accreditation is the shopping point when looking for a college or university.
Many for profit colleges and universities are accredited by the federally recognized regional accrediting bodies. These are the same bodies that accredit many of the traditional nonprofit schools. If the school is not accredited by one of the regional bodies, I suggest that a different school is selected. The kind of money that a student will invest in their education should justify at least that level of assurance of the viability of the degree they will complete.
My BS is from DeVry, my MBA is from UoP and I am a multiple 6 figure earner. My undergrad class of 37 has done very well as a whole. 32 out of 37 of us had multiple offers prior to graduation and most of us went to work for Fortune 500 companies immediately after graduation. Granted, all of us went to work initially in the semiconductor industry but for Fortune 500 companies none the less.
Now 19 years after graduation there are approximately 35% of my class who are 6 figure earners. Not official statistics but confirmed through regular network contacts.
The sheer work load I had to perform in the for profit schools far outweighed that which I had to do at the not for profits. When I was majoring in Sociology, Poli-Sci, Finance, Economics, etc.... (I declared 7 majors during my 11 year undergrad career at 5 different colleges or universities) at the nonprofits I rarely had to attend class much less actually do any work. That was never an option in the for profit format schools I attended. Regardless of test scores if class was not attended or if homework was not done a passing grade was not possible.
For me the for profit model worked well. I am an avid student. If I could find someone to pay me what I earn in industry to go to school that would be my dream career. What took me so long to finish my undergrad were the electives. Not because I did not have enough but because I had too many. Nearly every elective I took I loved. That is why I declared 7 majors during my 11 year undergrad career.
So, in my experience education is valuable. As long as a school is accredited it can be worth the effort and investment. The outcome is entirely dependent on the student and has little to do with the school. Not every school is right for every student. Students should shop for the school and degree they want. Do the research then select the school and program with the best return on investment.

Rags of TX 10:05AM May 13, 2013

Thats only if you have loans my family has a history in college my grandpa went to school in the 1930s at Ole Miss on a scholarship my uncle went to Yale University. don't listen to this if you pay in cash my family totals 96 colleges, when you include distant family. its only if you have debt. This is nonsense. i go to Devry University its a better Tech school that half of those non profit big schools.

Matt Hoskins of OH 10:17AM October 02, 2012

This is a story and not a factual report of findings with significant innuendo and presumption thrown in quite cleverly. I can say confidently that my bachelors and first masters, both from non-profit (tax exempt) catholic universities were less rigorous than my MBA from the University of Phoenix. The only difference between for-profit and non-profit is tax status. For profits pay taxes and non-profits do not. However, non-profits make profits greater than for-profits. Go to guidestar.org and review the 990's that non-profits file as required by the IRS. Some basic financial analysis will show shocking margins and so will the listing of the top paid officers of the non-profit university.

Joseph Mancin of VA 7:47PM July 06, 2012