Transfers to For-Profit Colleges Earn Less Than Others

A new report analyzed the earnings and employment outcomes for community college transfer students.

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Community college students who transfer to for-profit colleges and universities earn less than those who transfer to other types of colleges, according to a new report from the Center for Analysis of Postsecondary Education and Employment.

Researchers tracked the earnings and employment outcomes of 80,000 first-time students who enrolled at community colleges between 2001 and 2006 and subsequently transferred to another college or university. They found that although students at for-profit colleges usually earn more while they're in school, those who transferred to for-profit colleges on average earned between 6 percent and 7 percent less during 10 years after graduating than those who transferred to nonprofit or public institutions – more than offsetting that initial "opportunity cost."

[READ: The College Payoff: Two-Year Degrees Often Pay More, Science Degrees Less]

After examining the earnings of these students during a 10 year time span, the researchers found for-profit students made net earnings gains of $5,400 on average, compared with $12,300 and $26,700 for public and nonprofit students, respectively.

"Extended over a working life, the differences become much greater – and of course, these figures do not account for the higher tuition prices at for-profit colleges," the report says. "Policies that ease credit constraints may encourage more students to take a longer horizon when deciding on their choice of college."

Those findings are particularly concerning, the researchers said, because for-profit colleges disproportionately serve students from low-income and minority backgrounds. The study found that African-American and Hispanic students, as well as those who had performed poorly at community colleges, were far more likely to transfer to for-profit institutions.

But even when adjusting for those characteristic differences, the researchers found that the earnings disparity remained.

And because nearly all students at for-profit institutions (94 percent) receive federal financial aid, the report claims those colleges are essentially government-funded.

"Moreover, recent evidence has found high levels of student debt at these colleges, perhaps in part because of unclear, misleading, or even fraudulent recruitment practices," the report says. "Thus, it is important to establish whether for-profit colleges are a good investment for students and taxpayers."

[MORE: Change to Loan Qualifications Hurt Students at HBCUs, For-Profit Colleges]

The authors of the report argue the results should prompt an investigation into what factors propel certain students into for-profit colleges.

"Students may be poorly informed about what college is the right fit for them, or unaware of the many ways in which provision may differ across higher education sectors," the report says. "Policies to increase the comparative information available to students therefore hold promise."

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