Students who sought vocational certificates at for-profit colleges made an average of $900 less annually after attending the schools than they did before, according to a new study, leaving those who took out loans hard-pressed to pay them back.
In 2014, the Obama administration issued new rules limiting the amount of debt students can take on in career-training programs. Though no schools were named in the study, some of the biggest for-profit colleges -- including DeVry University and the University of Phoenix -- have faced federal lawsuits or investigations that suggested they deceived students about the likelihood of finding jobs in their fields of study and how much they would earn.
The NBER paper analyzed data for 567,000 students who pursued vocational certificates at for-profit schools between 2006 and 2008. Eighty-three percent of them carried student loan debt. Of the 278,000 who sought similar certificates at public community colleges, just 25 percent were indebted, adjusting for demographic differences between the groups.
In 2014, the average tuition for certificate students at for-profit colleges was $8,118, compared to $712 for community college students in these programs, again adjusting for differences between the groups.
The researchers -- Treasury Department financial economist Nicholas Turner and economist Stephanie Riegg Cellini of George Washington University -- focused the analysis on students seeking the kinds of vocational certificates that are a popular offering at for-profit schools. These credentials can help students find work in fields such as nursing, auto repair, cosmetology and heating and air conditioning.
The disparities in earnings between for-profit and community college students was especially pronounced for men, who made nearly $2,200 more on average each year after attending a public community college than they had before.
The discrepancies are even more striking because the data includes students who dropped out, and students at for-profit colleges are more likely to complete their programs. For those who do finish, the advantages of having attended a community college are even greater.
A major exception was cosmetology, in which for-profit schools seemed to do modestly better for their students. Cosmetology is very popular at for-profit schools -- about 19 percent of students seeking certificates at a for-profit school were in a cosmetology program in the federal data. (Various medical programs accounted for much of the rest.)
Cellini and Turner speculate that many people studying cosmetology attend for-profit schools connected with recognizable brands, such as the Aveda Institute. That recognition gives students an advantage on the labor market.
At the same time, it is difficult to know whether studying cosmetology is a good financial choice for students. Newly credentialed cosmetologists' incomes appear to decline substantially regardless of what kind of school they attend.
The figures reflect a decline of $1,400 for those who attended for-profit schools and $1,700 for those who attended community colleges. That could be because cosmetologists can take payments from their clients in cash without reporting all of their income to the federal government, Cellini and Turner note.
The Association of Private Sector Colleges and Universities, a trade organization, argued the study was incomplete. Focusing on recent data for the relatively new industry, the researchers couldn't calculate the effects of attending a for-profit school over the long-term.
The study "looks only at short-term earnings and not at the lifetime benefit of higher education," said Steve Gunderson, the association's president, in a statement. "Without a career focused degree or certificate, these students would not have an opportunity to improve their earning potential."
Cellini rejected that argument in an interview. Although earnings for for-profit students will likely improve with time as they become more experienced on the job, the same is true of their peers at community colleges, she said.
"We need to look carefully at the sector as a whole," Cellini said. "Students need to have information about all their options, the debt they may incur and the changes in earnings they can expect."
Correction: Some passages in an earlier version of this post incorrectly described the former students in the study from the National Bureau of Economic Research. The study includes both students who dropped out of their programs and students who received their certificates. This version has been corrected. We regret the error.
More from Wonkblog: