For-Profit Universities During the Great Recession: Are For-Profit Universities Better Suited to Weathering an Economic Downturn?

Abstract

This study examines the outcomes of students attending and graduating from for-profit universities (higher education institutions operated by for-profit corporations) in the past decade from 2007 to 2017, in particular comparing how these for-profits perform during recessionary conditions compared to their non-profit peers.

In the past few years, there have been a number of studies criticizing such for-profit institutions, with objective metrics of student outcomes significantly worse than those of their non-profit peers. Yet, significant debate still exists in whether these high costs, poor student outcomes, or controversial business practices are the result of predatory institutional policy, or if these institutions provide a much-needed service for non-traditional students who may not otherwise be able to access higher education.

Although there are a variety of background factors (race, income, age, family education background, etc.) that make it difficult to quantify the extent to which the weaker outcomes from for-profits are a result of the institution versus adverse selection from its attendees, this study seeks to examine how such institutions respond to an economic downturn in the 2007-2010 recession phase compared to the economic recovery/growth phase in the 2010-2013 period.

Using data obtained from the official US Department of Education’s College Scorecard, this study will evaluate the six most commonly reported student outcomes, including post-graduation mean income, graduation/program completion rate, student retention, debt repayment status, student unemployment rate, and cohort default rate. By comparing how each type of institution (for profit vs. non-profit) reacts to economic downturns compared to its own previous performance, we can evaluate how weaker job prospects and lower family wealth can influence decisions to attend pricier but less selective for-profit colleges relative to the overall greater demand for education during weak economic conditions.

Lastly, we will examine the impact that rising demand through increasing enrollment at for-profits affects their performance, thus addressing the question of whether this increase in demand holds any correlation to their relative performance to similarly overcrowded public institutions in times of surplus demand.