For-Profit Colleges and Minority Students: Champions or Exploiters?

Apart from the debate over the likely tuition and enrollment impacts of excluding for-profit programs from a Pell Grant increase, the empirical question of whether for-profit schools advance educational equity for their students also can be tested against the record. Do these schools typically do a good job of educating and training low-income minority students? Or would the Pell Grant boost do more to improve student welfare at, say, the community colleges that compete with for-profit schools for low-income students pursuing career education and occupational credentials?

To be sure, there are good for-profit schools that have a solid record of preparing low-income students for jobs in their field of training and there are community college certificate programs that have poor job training records. But on average, many, if not most, students at for-profits end up worse off than if they had enrolled in a community college or even not attended college at all. For-profit students are simply much more likely than their peers at other institutions to be deep in debt and hold worthless degrees. Twelve years after students first enrolled in a for-profit college in 2003–04, more than half of the students—a staggering 52.5 percent—had defaulted on their federal student loan, according to the National Center for Education Statistics. Default rates are even worse for Black students, with a jaw-dropping 75 percent of Black students defaulting within 12 years.

Many for-profit schools not only leave students saddled with unmanageable debts but also with no realistic prospect of paying off their federal loans from the jobs for which they were trained. The only comprehensive national study of earnings returns for all students at for-profit colleges found that federally supported students who earned a certificate, associate degree, or bachelor’s degree at for-profit schools between 2006 and 2008 actually saw their earnings decline after attending a for-profit school.

Those dismal results aren’t caused by a few bad apple institutions. Most students at for-profits would appear to be better off not attending college at all. Only a third of students who enroll in for-profit colleges earn as much as young adults who never went to college.

For low-income borrowers—i.e., for the students who might qualify for Pell Grants—outcomes are even worse. Most students receiving federal student aid at for-profit schools have low earnings, before or after their program of training. But it is deeply troubling that the median earnings of federal loan borrowers at for-profit schools also declined from 2002 to 2013, from $24,800 to $23,200, according to comprehensive government data. As Senate Majority Whip Sen. Dick Durbin (D-IL) put it recently on the Senate floor, withholding the Pell Grant increase would not be “about Congress punishing students—the for-profit college industry is doing that quite well themselves. This is about protecting traditionally underserved, marginalized students and preventing taxpayer dollars from being wasted.”