Veterans, for-profit higher education, and economic outcomes

Americans often use Veterans Day to consider the actions that soldiers, sailors, marines, and airmen undertake during wartime. But tomorrow we should also think about what happens to veterans after they return home. In particular, we should consider how the government helps improve veterans’ futures through education.

The federal government has taken steps in the past to use the military as a force for social mobility. The original GI Bill gave millions of veterans a helping hand through higher education—legislation that was updated by Congress for the post-9/11 world in 2008. Sadly, the promise of this original bill didn’t reach all veterans, particularly African-Americans. What’s more, in recent years veterans have been increasingly likely to attend for-profit colleges instead of public institutions or private non-profit schools—with mostly unsatisfactory results.

Enrollment at for-profit colleges increased dramatically over the past 15 or so years as taxpayer support for public community colleges was cut and as for-profit schools aggressively advertised their services. Veterans are a favorite target of for-profit schools due to a loophole in federal student aid rules. The so-called 90-10 rule cuts off federal funding for any school that receives more than 90 percent of its revenue from federal financial aid. But financial aid for veterans is exempted from this rule. So if a school can enroll a high number of veterans, they can get around the loophole, though there is a rule that caps veteran enrollment at 85 percent of students.

This trend might not be particularly worrisome if veterans were receiving a quality education from for-profit schools. But a large body of research shows that students who attend for-profit schools don’t get the same sort of return on their investment that other students do.

Research by Stephanie Cellini of George Washington University and Latika Chaudhary of Scripps College shows that graduates of associate degree programs at for-profit schools have an earnings advantage over high-school educated workers. They also find, however, that this return is lower than returns found for other kinds of higher-education institutions.

David J. Deming, Claudia Goldin, and Lawrence Katz, all of Harvard University, find that for-profit graduates fare worse on a variety of measures compared to students at non-profit private and public universities and colleges. They end up having higher unemployment and lower earnings six years after graduation. In another paper with Noam Yuchtman, of the University of California, Berkeley, and Amira Abulafi, of the National Bureau of Economic Research, the three Harvard researchers find that students who go to for-profit schools are 22 percent less likely to get a callback after applying for a job.

If we want to uphold our end of the bargain with veterans, we need make sure to create a program that does its best to boost outcomes for those returning home. Policymakers need to consider the best ways to give veterans a helping hand up the income ladder in our time of high and rising economic inequality.

November 10, 2014


Post-secondary Education

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