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For-Profit Higher Education: An Assessment Of Costs And Benefits

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  • Cellini, Stephanie Riegg
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    Abstract

    This paper provides a summary and analysis of the economics of the two-year, for-profit higher education sector. I highlight studies that have contributed to our understanding of this sector and assess its social costs and benefits. I generate a rough estimate of the annual per student cost to taxpayers of federal and state grant aid, appropriations, and contracts flowing to these institutions, as well as the cost of defaults on federally-subsidized student loans. I also estimate the out-of-pocket educational expenses and foregone earnings of for-profit students. I find that for-profit, two-year colleges cost taxpayers roughly $7,600 per year for a full-time equivalent student. Students bear most of the cost of their education, in the form of foregone earnings, tuition, and loan interest amounting to $51,600 per year. I contrast these costs with similar estimates for public community colleges, including the direct subsidization of the sector by state and local taxpayers. I find that community colleges cost taxpayers more than for-profits — about $11,400 per year — but students incur costs of only about $32,200 per year of attendance. Considering both public and private costs, community colleges are thus roughly $15,600 less expensive. For-profit college attendance would result in net benefits for students if earnings gains exceed 8.5 percent per year of education, while students in community colleges require minimum earnings gains of 5.3 percent per year of education to reap positive net benefits.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 65 (2012)
    Issue (Month): 1 (March)
    Pages: 153-79

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    Handle: RePEc:ntj:journl:v:65:y:2012:i:1:p:153-79

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Christopher Jepsen & Kenneth Troske & Paul Coomes, 2012. "The labor-market returns to community college degrees, diplomas and certificates," Working Papers, Geary Institute, University College Dublin 201221 Classification-JEL, Geary Institute, University College Dublin.
    2. Jacobson, Louis & LaLonde, Robert J. & Sullivan, Daniel G., 2004. "Estimating the Returns to Community College Schooling for Displaced Workers," IZA Discussion Papers 1017, Institute for the Study of Labor (IZA).
    3. David J. Deming & Claudia Goldin & Lawrence F. Katz, 2012. "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(1), pages 139-64, Winter.
    4. Chung, Anna, 2008. "The Effects of For-Profit College Training on Earnings," MPRA Paper 18972, University Library of Munich, Germany, revised May 2009.
    5. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
    6. Lance Lochner & Enrico Moretti, 2004. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 155-189, March.
    7. Stephanie Riegg Cellini, 2009. "Crowded Colleges and College Crowd-Out: The Impact of Public Subsidies on the Two-Year College Market," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 1(2), pages 1-30, August.
    8. Thomas S. Dee, 2003. "Are There Civic Returns to Education?," NBER Working Papers 9588, National Bureau of Economic Research, Inc.
    9. Stephanie Riegg Cellini, 2010. "Financial aid and for-profit colleges: Does aid encourage entry?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(3), pages 526-552.
    10. W. Norton Grubb, 1993. "The Varied Economic Returns to Postsecondary Education: New Evidence from the Class of 1972," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 28(2), pages 365-382.
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    Cited by:
    1. Cory Koedel & Rajeev Darolia & Paco Martorell & Katie Wilson & Francisco Perez-Arce, 2014. "Do Employers Prefer Workers Who Attend For-Profit Colleges? Evidence from a Field Experiment," Working Papers, Department of Economics, University of Missouri 141, Department of Economics, University of Missouri.

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