Community College Students Who Transfer to For-Profit Colleges Earn Less

—Community college students who transfer to for-profit colleges earn less than students who transfer to public or private non-profit colleges, concludes a new study from the Center for Analysis of Postsecondary Education and Employment (CAPSEE).

The study is the first to examine the income effects of transferring to a for-profit college from a community college. Earlier studies, including a recent study from CAPSEE, have compared earnings for students who attend community colleges and for-profit colleges and found that students who attend for-profit colleges are less likely to be employed after college and earn less on average than community college students.

For this study, CAPSEE researchers analyzed the earnings of 80,000 first-time, degree-seeking students who enrolled in community college during the 2000s and transferred to another college or university. Student incomes were tracked via state unemployment insurance data through the beginning of 2012.

The study found that there were significant differences in the community college students who chose to transfer to a for-profit institution: Black and Hispanic students, and students who performed poorly and accrued fewer credits at the community college were far more likely to transfer to a for-profit than a non-profit or public college.

Even when controlling for these differences in student characteristics, however, the study found that students who transferred to for-profit colleges earned 6-7 percent less than students who transferred to non-profit or public institutions.

The study also found that students who transferred to for-profit colleges had higher earnings whilst in college. Students who attended for-profit colleges saw a decline in income of $130-$270 per quarter; by comparison, the decline in income for students enrolled in public colleges was four times as large, and for students at non-profit colleges, the decline was ten times as large. This difference—the lower ‘opportunity cost’ of attending for-profit colleges—may explain why these colleges are attractive to low-income students.

However, the earning gains after leaving college were significantly higher for public and nonprofit college students. Over time these gains more than offset the ‘opportunity cost’ differences. Looking over ten years, for-profit students experienced net earnings gains of only $5,400, whereas public and nonprofit college students experienced gains of $12,300 and $26,700 respectively. These figures do not account for the higher tuition costs at for-profit colleges.

The wage penalty for transferring to a for-profit college was consistent across subgroups of students, although the penalty was greatest for for-profit students who did not complete a degree.