For-Profit Higher Education and Financial Aid: Are Differences Driven by Schools or Students?

Journal of Social Research & Policy, Volume: 5, Issue: 1, pp. 53-65

Date: July 2014

ISSN: 2067-2640 (print), 2068-9861 (electronic)

Abstract: Acquiring a college education has become increasingly important in maintaining a competitive edge in the job market over the past two decades; the number of colleges and universities in the United States has grown right along with higher education’s importance. While traditional four-year and community colleges are expanding and multiplying, so are proprietary, for-profit colleges and universities. It has been noted that the next “bubble” to burst could be in student debt, which is cause for concern for students, their families and taxpayers as well. At the moment, proprietary schools receive federal aid and loans through taxpayer supported programs and social institutions, as well as private lending institutions.

In order to determine to nature of borrowing differences, we use a two-stage probit model. The National Center for Education Statistics Beginning Postsecondary Longitudinal Study restricted-use data set provided a sample of 7620 students followed between 2003 and 2006. Results show that, after controlling for demographic, social and academic characteristics in the first stage, for-profit attendance still significantly increases student debt burdens. Federal loan debt is increased by $945 and total debt by $1495 after holding constant those contributing factors from the first stage. $945 represents a 48.2 percent increase from a mean federal loan debt of $1961. Thus, analysis shows that something specific to for-profit institutions has led to increased student debt burdens.

Keywords: Education; Higher Education; Public Finance; Social Policy; Government Expenditures.