For-profit colleges

Future of Children

Volumn 23, Issue 1, 2013, Pages 137-163

  Deming, David ^a   Goldin, Claudia ^b   Katz, Lawrence ^b  

^a HARVARD GRADUATE SCHOOL OF EDUCATION   (United States)

^b HARVARD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ADOLESCENT; ADULT; COST BENEFIT ANALYSIS; DECISION MAKING; ECONOMICS; EDUCATION; EDUCATIONAL STATUS; FINANCIAL MANAGEMENT; HUMAN; MINORITY GROUP; ORGANIZATION AND MANAGEMENT; SCHOOL; UNITED STATES; VULNERABLE POPULATION; YOUNG ADULT;

ADOLESCENT; ADULT; CAREER CHOICE; COST-BENEFIT ANALYSIS; EDUCATION; EDUCATIONAL MEASUREMENT; EDUCATIONAL STATUS; FINANCING, GOVERNMENT; HUMANS; MINORITY GROUPS; PRIVATIZATION; SCHOOLS; TRAINING SUPPORT; UNITED STATES; VULNERABLE POPULATIONS; YOUNG ADULT;

EID: 84877781200     PISSN: 10548289     EISSN: 15501558     Source Type: Journal    
DOI: 10.1353/foc.2013.0005     Document Type: Article

References (77)

1. Daniel L. Bennett, Adam R. Lucchesi, and Richard K. Vedder, "For Profit Higher Education: Growth, Innovation, and Regulation, " policy paper (Washington: Center for College Affordability and Productivity, 2010).
2. Title IV eligibility allows institutions to administer federal student aid, primarily in the form of Pell Grants and Stafford Loans. The discussion and analysis in this paper excludes for-profit schools that are not Title IV eligible; little is known about these schools because the U.S. Department of Education does not track them. Virtually all degrees are granted by Title IV-eligible institutions, but programs that are less than two years in length that grant certificates (also diplomas) often are found at non-Title IV institutions. For an analysis of the importance of the non-Title IV group of for-profit schools using state registration data, see Stephanie R. Cellini and Claudia Goldin, "Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges, " Working Paper 17827 (Cambridge, Mass.: National Bureau of Economic Research, February 2012).
3. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
4. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
5. Daniel L. Bennett, Adam R. Lucchesi, and Richard K. Vedder, "For Profit Higher Education: Growth, Innovation, and Regulation, " policy paper (Washington: Center for College Affordability and Productivity, 2010).
6. Sandy Baum and Kathleen Payea, "Trends in Student Aid 2011" (New York: College Board, 2011). Most of the increase in Pell Grants occurred in 2009 and 2010, with the American Recovery and Reinvestment Act of 2009 increasing annual Pell Grant appropriations by more than $15 billion in 2009. The increase in Stafford Loan volume since 2000 has been much larger for unsubsidized than for subsidized loans.
7. Authors' calculations using the Grapevine survey of state tax support for higher education. Grapevine, Historical Data, edited by Jim Palmer (Normal, Ill.: Illinois State University, Center for the Study of Education Policy, years 2000 to 2010) (http://grapevine.illinoisstate.edu/historical/index.htm).
8. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
9. Of the 5.265 million increase in fall enrollments in Title IV institutions from 2000 to 2009, for-profits accounted for 1.566 million, or 29.7 percent. Of the 1.318 million increase in degrees and certificates awarded by Title IV institutions from 2000-01 to 2009-10, for-profits accounted for 438,000, or 33.2 percent. See U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 2002, table 170; 2011, table 196.
10. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
11. U.S. Government Accountability Office, "Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices, " testimony before the Committee on Health, Education, Labor, and Pensions, U.S. Senate, Washington, August 4, 2010 (www.gao.gov/new.items/ d10948t.pdf).
12. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
13. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
14. National Center for Education Statistics, "2004/09 Beginning Postsecondary Students Longitudinal Study (BPS: 04/09), " NCES 2012-246 (U.S. Department of Education, 2011). Figures are weighted to be nationally representative of first-time, full-year undergraduates in fall 2003 in for-profits, community colleges, and nonselective four-year public and nonprofit institutions. Nonselective four-year institutions are defined by the BPS as either explicitly open admission or in the bottom 15 percent of median SAT/ ACT scores and in the bottom 15 percent of the share of applicants denied admission.
15. For the definition of "selective" and "nonselective, " see table 1.
16. This definition of loan default in the BPS is different from the regulatory standard established by the U.S. Department of Education, which measures an institution's "three-year cohort default rate" as the share of borrowers at each school who enter into repayment on federal loans during a twelve-month period and subsequently default in the next three years. Because a shorter window leads to lower counts, the official 2009 three-year cohort default rate among proprietary schools of 22.7 percent implies that for-profit students in the BPS data have lower default rates than the 2009 national average. That is likely due to some combination of worsening economic conditions and differences between the BPS sample and the overall population of students at for-profits.
17. Some students switch into different types of award programs (moving, say, from a certificate to an associate's program) within the same institution during their first semester. In all of our results, we classify students by their initial self-reported plans to seek each type of award in the fall of 2003, rather than by the program in which they are enrolled at the end of the semester.
18. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
19. Arthur Keiser, "Private Sector Schools Could Boost Employment, " Daily Caller, July 20, 2011 (http:// dailycaller.com/2011/07/20/private-sector-schools-could-boost-employment/). Keiser is the chairman of the Association of Private Sector Colleges and Universities.
20. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
21. Kevin Lang and Russell Weinstein, "Evaluating Student Outcomes at For-Profit Colleges, " Working Paper 18201 (Cambridge, Mass.: National Bureau of Economic Research, June 2012).
22. Nicholas Turner, "Do Students Profit from For-Profit Education? Estimating the Returns to Postsecondary Education with Tax Data" (U.S. Department of the Treasury, 2011).
23. Stephanie R. Cellini and Latika Chaudhary, "The Labor Market Returns to a Private Two-Year College Education" (George Washington University, 2011).
24. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
25. Sarah E. Turner, "For-Profit Colleges in the Context of the Market for Higher Education, " in Earnings from Learning: The Rise of For-Profit Universities, edited by David W. Breneman, Brian Pusser, and Sarah E. Turner (State University of New York Press, 2006), pp. 51-70.
26. U.S. Department of Labor, Bureau of Labor Statistics, "Occupational Outlook Handbook 2011-2012" (www.bls.gov/ooh/home.htm).
27. James E. Rosenbaum, Regina Deil-Amen, and Ann E. Person, After Admission: From College Access to College Success (New York: Russell Sage Foundation, 2006).
28. James E. Rosenbaum, Regina Deil-Amen, and Ann E. Person, After Admission: From College Access to College Success (New York: Russell Sage Foundation, 2006).
29. Abby Goodnough, "New Meaning for Night Class at 2-Year Colleges, " New York Times, October 29, 2009 (www.nytimes.com/2009/10/28/education/28community.html).
30. Pearson Foundation, Second Annual Pearson Foundation Community College Student Survey (Washington: 2011).
31. Pearson Foundation, Second Annual Pearson Foundation Community College Student Survey (Washington: 2011).
32. For a more detailed discussion of the research on remediation in higher education, see Eric Bettinger, Angela Boatman, and Bridget Terry Long, "Student Supports: Developmental Education and Other Academic Programs, " Future of Children 23, no. 1 (2013).
33. David Moltz, "California Calamity, " Inside Higher Ed (www.insidehighered.com/news/2009/05/21/ california).
34. David Moltz, "California's Deal with Kaplan, " Inside Higher Ed (www.insidehighered.com/ news/2010/05/26/kaplan).
35. Kaplan University, "Kaplan University Launches Multi-Million Dollar California Commitment and Experiential Learning Scholarships, " Press Center (http://portal.kaplan.edu/PageTemplates/ PressRelease_KHEBrand.aspx?id=13677).
36. Stephanie R. Cellini, "Crowded Colleges and College Crowd-Out: The Impact of Public Subsidies on the Two-Year College Market, " American Economic Journal: Economic Policy 1, no. 2 (August 2009): 1-30.
37. Federal Register, "Revision to Section 668.14(b)(22) of the Higher Education Act of 1965" (November 1, 2002), pp. 67072.
38. U.S. Government Accountability Office, "Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices, " testimony before the Committee on Health, Education, Labor, and Pensions, U.S. Senate, Washington, August 4, 2010 (www.gao.gov/new.items/ d10948t.pdf).
39. Andrew Steinerman, Jeffrey Volshteyn, and Molly McGarrett, "Education Services Data Book" (New York: J.P. Morgan North American Equity Research, Business and Education Services, 2011).
40. U.S. Department of Education, Federal Student Aid (http://federalstudentaid.ed.gov/datacenter/proprietary. html).
41. Kevin M. Stange, "An Empirical Investigation of the Option Value of College Enrollment, " American Economic Journal: Applied Economics 4, no. 1 (2012): 49-84.
42. U.S. Government Accountability Office, "Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices, " testimony before the Committee on Health, Education, Labor, and Pensions, U.S. Senate, Washington, August 4, 2010 (www.gao.gov/new.items/ d10948t.pdf).
43. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
44. For example, in many states, such as Texas, a sizable share of community college funding also comes from local property tax revenues, either at the county level or through the establishment of community college taxing districts. In Florida, on the other hand, all public funding of community colleges comes from a block grant provided by the state. See Donald C. Hudson, A Policy Analysis of Community College Funding in Texas, doctoral dissertation, University of Texas at Austin (2008).
45. David Moltz, "For Florida Community Colleges, Who Should Pay?" Inside Higher Ed (www.insidehighered.com/ news/2008/09/19/florida).
46. National Center for Education Statistics, National Postsecondary Student Aid Study 2008 (U.S. Department of Education, 2008) (http://nces.ed.gov/datalab/).
47. National Center for Education Statistics, National Postsecondary Student Aid Study 2008 (U.S. Department of Education, 2008) (http://nces.ed.gov/datalab/).
48. Apollo Group, Inc, "Higher Education at a Crossroads, " position paper (Phoenix: 2010).
49. Stephanie R. Cellini, "Crowded Colleges and College Crowd-Out: The Impact of Public Subsidies on the Two-Year College Market, " American Economic Journal: Economic Policy 1, no. 2 (August 2009): 1-30.
50. Stephanie R. Cellini, "For-Profit Higher Education: An Assessment of Costs and Benefits, " National Tax Journal 65, no. 1 (March 2012): 153-80.
51. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
52. Adam Jaffe, "Real Effects of Academic Research, " American Economic Review 79, no. 5 (December 1989): 957-70.
53. Enrico Moretti, "Estimating the Social Return to Higher Education, " Journal of Econometrics 121, no. 1-2 (2004): 175-212.
54. Claudia Goldin and Lawrence F. Katz, "The Shaping of Higher Education: The Formative Years in the United States, 1890 to 1940, " Journal of Economic Perspectives 13, no. 1 (Winter 1999): 37-62.
55. Authors' calculations based on the data from U.S. Department of Education, Federal Student Aid Data Center (http://federalstudentaid.ed.gov/datacenter/).
56. Military educational benefits do not count toward the 90 percent federal Title IV student aid revenues under the 90/10 rule. The for-profits have, in consequence, actively recruited military benefit recipients (veterans, service members, and their family members), especially under the generous Post-9/11 GI Bill enacted in 2008. For-profits accounted for 36.5 percent of the Post-9/11 GI Bill benefits during the first year of the program and 50 percent of the Department of Defense Tuition Assistance benefits in FY 2011. See U.S. Senate Health, Education, Labor and Pensions Committee, "Department of Defense Data Reveals For-Profit Colleges Are Taking in the Bulk of Military Education Benefits, " Press Release (2012) (http://www.harkin.senate.gov/documents/pdf/4f468d002ae0a.pdf).
57. Title IV eligibility allows institutions to administer federal student aid, primarily in the form of Pell Grants and Stafford Loans. The discussion and analysis in this paper excludes for-profit schools that are not Title IV eligible; little is known about these schools because the U.S. Department of Education does not track them. Virtually all degrees are granted by Title IV-eligible institutions, but programs that are less than two years in length that grant certificates (also diplomas) often are found at non-Title IV institutions. For an analysis of the importance of the non-Title IV group of for-profit schools using state registration data, see Stephanie R. Cellini and Claudia Goldin, "Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges, " Working Paper 17827 (Cambridge, Mass.: National Bureau of Economic Research, February 2012).
58. Stephanie R. Cellini, "Financial Aid and For-Profit Colleges: Does Aid Encourage Entry?" Journal of Policy Analysis and Management 29, no. 3 (Summer 2010), 526-52.
59. National Archives and Records Administration, "Amendments to the Higher Education Act, 34 CFR 668.187(a), " Electronic Code of Federal Regulations (http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr& rgn=div5&view=text&node=34:3.1.3.1.34&idno=34).
60. In addition, an amendment to the Higher Education Act in 1998 lengthened the period of delinquency required to constitute a "default" from 180 to 270 days. This action lowered the default rate mechanically, although much of the drop in defaults happened in the mid-1990s, before this change.
61. U.S. Department of Education, Office of Inspector General, "Audit to Determine if Cohort Default Rates Provide Sufficient Information on Defaults in the Title IV Loan Programs, " Final Audit Report (2003). This audit study of cohort default rate methodology found that trends in defaults looked different when a third year was added to the calculation. It also showed that deferments and forbearances rose from 5.2 percent of all borrowers in 1993 to 21.7 percent in 1999. Loans in deferment or forbearance over the life of the cohort default rate window are counted as "nondefaults. "
62. To compensate for this change, the threshold of a 25 percent default rate in three consecutive years was raised to 30 percent (but the one-year threshold of 40 percent remained the same).
63. Authors' calculations using federal data on trial three-year cohort default rates: U.S. Department of Education, Federal Student Aid: Default Rates (http://studentaid.ed.gov/about/data-center/student/default).
64. Stephanie R. Cellini, "Financial Aid and For-Profit Colleges: Does Aid Encourage Entry?" Journal of Policy Analysis and Management 29, no. 3 (Summer 2010), 526-52.
65. Federal Register, "Program Integrity: Gainful-Employment Debt Measures" (June 13, 2011), pp. 34386-539 (http://federalregister.gov/a/2011-13905).
66. Unlike the cohort default rate, in this calculation students with deferments and forbearances do not count as being "in repayment. " They must actually repay at least one dollar of their loans to qualify.
67. United States District Court for the District of Columbia, Association of Private Colleges and Universities v. Arne Duncan and United States Department of Education, Civil Action 11-1314 (RC) (http://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2011cv1314-25).
68. U.S. Department of Education, Homeroom blog (July 2, 2012) (www.ed.gov/blog/2012/07/statement-ofthe-united-states-department-of-education-in-response-to-the-ruling-of-the-u-s-district-court-for-thedistrict-of-columbia-in-apscu-v-duncan/).
69. Programs with thirty or fewer students in the 2011 graduating cohort do not report repayment and debtto-income data. Over time, the regulation will apply to programs with more than thirty graduates over a four-year time period.
70. We define a "chain" as having campus branches in at least two census divisions or as being located primarily online. In constructing our definition of a "chain" for-profit, we follow David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (2012): 139-74, and combine "regional" and "national" chains into a single category. We classify institutions as "online" based on the institution's name and the distribution of students across U.S. states.
71. U.S. Department of Education, Federal Student Aid: 2011 Gainful Employment Informational Rates (http://federalstudentaid.ed.gov/datacenter/gainful2.html). These Department of Education data classify each program by its Classification of Instructional Program (CIP) code, and we separate programs by their major 2-digit CIP code program area.
72. Andrew Steinerman, Jeffrey Volshteyn, and Molly McGarrett, "Education Services Data Book" (New York: J.P. Morgan North American Equity Research, Business and Education Services, 2011).
73. U.S. Department of Education, Institute of Education Sciences, Postsecondary Institutions and Price of Attendance in 2011-12.
74. Degrees and Other Awards Conferred: 2010-11
75. 12-Month Enrollment: 2010-11 (September 2011) (http//nces.ed.gov/pubs2011/2011250.pdf).
76. Andrew Steinerman, Jeffrey Volshteyn, and Molly McGarrett, "Education Services Data Book" (New York: J.P. Morgan North American Equity Research, Business and Education Services, 2011).
77. Bridget Terry Long, "Grading Higher Education: Giving Consumers the Information They Need" (Washington: Center for American Progress and the Hamilton Project, 2010). This paper discusses an approach to improving consumer information regarding higher education.