An alarming trend is emerging in higher education: students attending for-profit postsecondary schools are defaulting on student loans at more than double the default rate for borrowers at other types of schools.  Forty-eight percent of federal student loan borrowers who attended for-profit institutions and who entered repayment in 2008 had defaulted on their loans by 2010.  For-profit (or proprietary) schools are owned privately or held by publicly traded companies, and typically offer career-based education, much of which may be focused online.  These schools attract a large proportion of low-income students, and are significantly more expensive than the public schools and community colleges traditionally attended by this demographic group.

The high student loan default rates associated with for-profits have fueled widespread complaints that these schools overburden students with debt without sufficiently increasing their earning potential, and have spurred investigations by the Government Accountability Office and U.S. Senate.  These investigations found proprietary schools employing deceptive and misleading recruiting practices which primarily target a low-income student base.   However, no research has yet been done to determine whether students receiving an education from for-profit institutions are actually subject to disadvantages in the labor market.  If labor market disadvantages, (constituting substandard ability to achieve gainful employment and inferior earning potential compared to students obtaining education from other types of schools) are found to be associated with a for-profit education, this may provide a concrete basis from which to develop more stringent gainful employment requirements for proprietary schools.

This paper will discuss the preliminary findings of a field experiment to determine whether employers screening job applicants give a credential (degree or certificate) from a for-profit institution the same consideration as a similar credential from a community college, in fields typically pursued by low-income women.  Women are subject to a variety of disadvantages in the labor market, including occupational segregation, a gender wage gap, and for mothers, a motherhood wage gap.  If for-profit credentials are viewed less highly by employers relative to other types of schools, an education from a proprietary school may intensify labor market disadvantages and economic hardship for low-income women rather than working to rectify them.

This study will entail applying to job openings in Boston, MA in two fields commonly pursued by low-income women who have completed non-baccalaureate certificates or associate’s degrees, over a four-month period.  For each position advertised, two substantively identical resumes (in terms of work experience, skills, etc.) will be submitted for consideration.  One resume will list the candidate’s postsecondary education as being from a proprietary school; the other will list a Massachusetts community college.  Data will be collected and analyzed on how many of the “candidates” with for-profit college credentials are contacted by employers for an interview, as compared with candidates with similar credentials from a community college.  It is hypothesized that an education from a proprietary school is viewed as less valuable in the labor market than a similar level of education from a community college.