Controversial Study Says For-Profit, Private Colleges Better for Taxpayers

As California’s public university systems wrestle with state budget reductions, layoffs, course cutbacks and tuition increases, a new study poses the question: What is the return on investment for students and taxpayers on bachelor’s degrees at the nation’s colleges and universities?

At a college like UCLA, a student with a bachelor’s degree is likely to earn nearly $525,000 in extra income over a lifetime of work compared with the typical earnings of someone with only a high school diploma, according to the report by the American Institutes for Research and the Nexus Research and Policy Center.

Because of that earning power, the UCLA graduate is likely to pay nearly $99,000 in additional federal and state taxes over his or her work life, the report contends.

But the average taxpayer subsidy for a college in UCLA’s category is around $108,000 per student — including Pell Grants, state appropriations, the benefits of the tax-exempt status of nonprofit universities and more. So, in the end, the net “loss” for the taxpayer on the Bruin’s undergraduate education is about $9,000.

The report found that in terms of wages, a bachelor’s degree pays off in comparison to a high school diploma – no matter whether the graduate attended a for-profit institution, a public flagship school, a less selective private college or Harvard. The size of the reward can vary, but there’s always an economic benefit over a lifetime of work, the report says.

The taxpayer’s return on investment is more complicated because of the varying levels of taxpayer support that goes to each type of university. While the analysis shows taxpayer subsidies to the most selective public institutions total more than $100,000 per degree, for example, it states that taxpayers actually gain an average of about $6,000 per bachelor’s degree granted by for-profit colleges.

But critics have questioned the report’s broad conclusions and aspects of its methodology in part because of its connections to the for-profit education sector, Inside Higher Ed reported.

The California-based Nexus Research and Policy Center, formerly called the National Research Center, was formed in 2008 by the for-profit University of Phoenix. Its president, Jorge Klor de Alva, is a former president of the University of Phoenix.

The study looked at a sample of data for about 40,000 students at more than 600 colleges and universities in broad categories, from noncompetitive to highly competitive in the public, private nonprofit and private for-profit sectors.

The report analyzed publicly available data from the U.S. Department of Education, the U.S. Census Bureau and the Internal Revenue Service, as well as salary reports from to estimate the costs and returns of a bachelor’s degree in each of the broad categories.

The report’s authors are working on separate state-by-state reports still to come, a spokesman said.

Inside Higher Ed reported that while several experts saw the report’s data on costs and economic returns as generally informative and helpful, they had a few key criticisms. The study doesn’t take into account the cost of college dropouts, which would disadvantage for-profit colleges.

The study also inflated the cost of the public institutions because the publicly available data doesn’t separate out how much of a state subsidy to say, UCLA, goes to graduate education, research and other functions. Also, while private institutions may cost the taxpayer less, the institutions ultimately pass that extra cost along to the students, Jane Wellman, executive director of the Delta Project on Postsecondary Education Costs, Productivity and Accountability, told Inside Higher Ed.

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