Housing & Mortgage
Yes, For-Profit Colleges Were Online Pioneers: What Else to Know?
Graduation rates are lower, student debt levels higher
The coronavirus is making college decisions more complicated. Paying full freight to “attend” a college that has moved classes online for the coming academic year, or plans to severely limit residential students, is a hard call. Especially as teaching online is often a new experience not just for students, but instructors as well.
Online learning plays into one of the main marketing advantages of for-profit colleges.They have always emphasized online classrooms, so at least there’s no implicit learning curve among the teaching staff and one would assume the tech experience has been honed.
Indeed, for-profit colleges are seeing an uptick in interest among potential students, and some schools are responding with beefed up marketing efforts.
But for families considering a for-profit college, it’s worthwhile to understand the success rate enrollees have, the cost, and how a degree from a for-profit is viewed by potential employers.
Graduation rates: Over a 40-year work life, the value of a college degree can be enormous. Research estimates it can add more than a million dollars in lifetime earnings relative to a high school degree: https://www.rate.com/research/news/good-news-student-debt
Implicit in that “value” proposition is that you don’t merely attend college; you also graduate. And that’s where things get messy. According to federal statistics, less than half of students who start full-time at a four-year school have a degree from that school within six years. Breaking that down, the graduation rate is 62% for attendees of private nonprofit schools, 53% for public schools and 27% for enrollees at private for-profit schools. (Private for-profit students do better seeking a two-year associate’s degree or certification, with six in 10 students finishing their program within four years.)
Debt: As a general rule, college financial expert Mark Kantrowitz, publisher of Savingforcollege.com, advocates limiting total student borrowing to no more than what the student expects to earn in the first year after graduation. Let’s call it $40,000.
A Brookings Institute analysis of government data finds that 12% of students who graduate from a four-year public school with a bachelor’s degree borrowed more than $40,000. For graduates of a four-year nonprofit private school, 20% leave with more than $40,000 in loans. Among graduates of a bachelor’s program at a for-profit college, 48% leave school with at least $40,000 in student debt.
Student loan default rates: While many types of debt can be “discharged” in bankruptcy, student loans are an exception. Short of complete disability, student loan debt will not be discharged in a bankruptcy. It must be repaid. If you default on federal student loans, lenders can “garnish” your wages, siphoning off 15% of every paycheck to settle your debt.
For the record, repayment of federal loans must start within six months of leaving school (or when you don’t attend at least half-time) regardless of whether you have the degree or not. Here too, government data analyzed by Brookings is not inspiring on for-profit schools. More than four in 10 students who borrowed to attend a two-year program at a for-profit had defaulted on their loan within five years of leaving school. For-profit students who sought a bachelor’s degree had a default rate of 33%. The default rate at public community colleges was 27%. At public four-year schools it was 14%, and for attendees of private four-year schools the default rate was 13%.
Job prospects: An academic research paper published in 2014 suggests that employers may prefer job candidates who graduate from nonprofit schools. Researchers created resumes with varying educational backgrounds and used them to apply to more than 10,000 job listings in five major cities. For a business job that required a bachelor’s degree, a resume that showed a degree from a public college got a call-back 20% more often than an identical resume listing a degree from a private for-profit school.
The researchers concluded: “The findings do not support the notion that a for-profit degree is a good investment relative to one from a public institution.”
That’s worth considering. In addition to considering a public four-year school, a community college can be a cost-effective solution. They’re a good place to get a two-year associate’s degree, or to strategically prepare for the final two years of bachelor’s degree at a public four-year university: https://www.rate.com/research/news/college-affordable