Association for Public Policy Analysis & Management

In an address to Congress on February 24, 2009, President Obama called for every American to commit to completing at least one year of higher education.  For some Americans, fulfilling this goal has meant enrolling in for-profit colleges.  In 2010, for-profit colleges enrolled 10 percent of undergraduates (NCES, 2011). However, at least partly as a result of requirements that these institutions must display job placement rates and the median loan debt of graduates on their websites, as well as a report released by the Government Accountability Office in 2010 describing their aggressive recruiting practices, enrollment in for-profit colleges has been declining and several chains have closed or are threatening to do so. On the one hand, this may not affect higher education attainment if students enrolling in these institutions would have otherwise enrolled in some other sector of higher education such as a public community college.  On the other hand, for-profit college closings could have a negative effect on educational attainment if the students who enrolled in these institutions wouldn’t have otherwise enrolled in higher education. Though a handful of studies have explored the question of whether some students see for-profit and community colleges as substitutes (Ordovensky, 1995; Bailey, Badway, and Gumport, 2001; Turner, 2003, 2006; Rosenbaum, Deil-Amen and Person, 2006; Cellini, 2009; Chung, 2012; Iloh and Tierney, 2014), to my knowledge, no study has explored the broader question of how the growth in for-profit colleges between 2000 and 2010 affected community education levels.

For this study I make use of IPEDS data from 2001 to 2012, merged with data from the Census, Bureau of Labor Statistics and Grapevine survey.  In order to explore how the growth of for-profit colleges affected higher education attainment at the county level, I make use of a differences-in-differences approach in which the first difference is whether or not a county has a new for-profit institution open during the sample period.  The second difference is before versus after the new for-profit institution opens.  I find that after a new for-profit college opens in a county, the number of short certificates produced at the county level increases by approximately 23 percent, on average, and this increase is statistically significant. In addition, the number of long certificates produced increases by approximately 13 percent, on average.  On the other hand, having a new for-profit college open in a county does not affect the number of associate’s degrees produced.

This research has important implications for developing effective regulations for the for-profit colleges.  The result of current policies such as the gainful employment regulation appears to be to force the for-profit colleges out of the market.  If for-profit colleges are providing access to higher education for students who wouldn’t otherwise enroll, then an alternative approach may be to design policies that improve the quality and affordability of these institutions but do not push them out of business.