Study: For-Profit Colleges With Federal Funds Charge More Tuition
For-profit colleges that accept federally funded student aid change 75 percent more for tuition, on average, than peer institutions that aren’t eligible for federal funds, according to a new study.
The National Bureau of Economic Research study [PDF], was conducted by Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard University.
Cellini wrote that these aid-eligible colleges “may indeed raise tuition to capture the maximum grant aid available,” adding that the differences in tuition between the two types of for-profit institutions equals the size of a Pell Grant, which is $5,550 annually.
Many of the conclusions of the paper point to the “Bennett Hypothesis,” a theory introduced by former Secretary of Education William Bennett that claims colleges receiving federal funding only use it to maximize profit through higher tuition.
The authors, however, state that their conclusions that support Bennett’s hypothesis are only applicable to for-profits. While Bennett advocated that federal aid was not something that should be given to any type of postsecondary institution, Cellini and Goldin say they’re just showing how for-profits abuse the federal funds to increase their own profit margins.
Forty percent of colleges eligible for Title IV funding were for-profit institutions in 2005, the most recent year for which data from the National Center for Education Statistics is available. Public universities, in comparison, comprised 31 percent.
Each for-profit college is supposed to prove to its federally-recognized accreditation agency that students are provided a quality education; this claim is weakened, however, when these colleges are increasing tuition to the point where it’s no longer affordable for many Americans. Accreditation agencies are now stepping up their own game to more closely examine the fiscal policy of for-profit colleges.
This disparity in tuition costs within the for-profit sector is a disturbing example of the issues plaguing the industry, as these schools continue to focus on the bottom line rather than adequate training for students.
President Obama’s 2013 fiscal budget, announced this week, does not target funding for job creation in the for-profit industry, the latest effort by the administration to crack down on such colleges and universities.
Jeff Raines is a journalism intern with Campus Progress. You can follow him on Twitter @Jeff_Raines.