College for All, Degrees for Few: For-Profit Colleges and Socioeconomic Differences in Degree Attainment

The recent expansion of for-profit colleges in US higher education has ignited much debate over the potential contributions, and limitations, of profit-maximizing educational businesses to socioeconomic inequality. For-profit colleges have a strong economic incentive to retain students, and can offer innovative services in order to compete with more established institutions. But for-profit colleges may also seek to increase revenues in ways that are not beneficial for student outcomes. Using detailed longitudinal information on a nationally representative sample of recent high school students (ELS 2002), this paper provides the first comprehensive and systematic assessment of the effect of attendance at for-profit colleges on socioeconomic inequality in student outcomes, measured as the attainment of bachelor's degrees. Results from logit models and weighted regression technique indicate that low-SES students that attend for-profit colleges are substantially less likely to earn a bachelor's degree than observationally similar students that attend non-profit open admission colleges. By contrast, enrollment at for-profit colleges has little bearing on the likelihood of high-SES students to earn a bachelor's degree. These findings suggest that for-profit colleges contribute to the maintenance of socioeconomic disadvantage, in that low-SES students with mobility aspirations are paying more for their education and yet are less likely to reap the benefits of their investment.