For-profit colleges aren’t all literal bait-and-switch schemes like the predatory nightmare known as Trump University. But most appear to be figurative con jobs nonetheless. The core promise of every for-profit school is that it can provide students with a means of spending and studying their way to greater prosperity. But a new working paper from the National Bureau of Economic Research suggests these schools are actually pushing students down the economic ladder.
NBER tracked 1.4 million students who left a for-profit school from 2006 through 2008 and found that most enrollees earned less annual income after attending college than they had before entering their programs. Undergraduates were less likely to be employed after leaving school; those who did find jobs earned smaller paychecks — averaging between $600 and $700 less in annual salary for six years after the end of their enrollment. Students in certificate programs saw an average annual earnings decline of $920 for the same time period.
Of course, this cohort did not pick the ideal time to reenter the workforce, and a healthy portion of these results can be attributed to the Great Recession. But the economic downturn does not fully explain these dismal figures: The average student who attended a certificate program at a nonprofit community college enjoyed an earnings increase of $1,500 during those same bleak years.
The key factor in this discrepancy appears to be the dismal graduation rate among students at for-profit schools. The minority of students who actually completed degrees at for-profit institutions saw a pay bump in NBER’s study.
But schools bear much of the responsibility for their own graduation rates. And the fact remains that for-profit schools appear to fail a majority of students who enroll in them. For most students, that failed investment is costly: Nearly nine out of ten for-profit-school attendees take on student debt.
The Obama administration’s 2015 “gainful employment” rule — which requires many programs at for-profit schools to maintain (relatively) low debt-to-income ratios among their graduates — dealt a blow to the industry’s worst offenders, triggering the closure of 1,400 programs that together enrolled 840,000 students. However, NBER’s study suggests that even schools with healthy debt-to-income ratios among graduates may function as pathways to downward mobility for the majority of their students.