Association for Public Policy Analysis & Management

Over the past decade and a half, the for-profit sector of higher education has seen unprecedented growth, markedly changing the higher education landscape. In this paper, we investigate the impact of attending for-profit colleges (relative to their public counterparts) on a variety of outcomes such as student loans, default, graduation, employment, and earnings. Using a fifteen-year panel, we exploit local labor demand shocks and their interactions with the pre-existing supply of for-profit colleges in these local areas to obtain plausibly exogenous variation in for-profit enrollment. We find that for a given labor demand shock, enrollment in for-profit colleges rises considerably relative to enrollment in other colleges when for-profit supply is higher. Our instrumental variables estimates reveal that students attending for-profit colleges are more likely to originate student loans, originate a larger volume of student loans, and are more likely to default. However, for-profit students are equally likely to graduate, and their earnings six years after graduation are no different from their public counterparts. These findings hold both for students attending two year/less than two year colleges as well as four-year colleges. Overall, our analysis suggests that for-profit attendance leads to relatively worse outcomes, despite considerably higher tuition costs.