No, Libertarians, Community Colleges Are Not a Bad Investment Choice

We’re still a few weeks away from Punxsutawney Phil’s time to shine, but it’s already Groundhog Day on the Washington Post’s Post Everything blog thanks to Cato’s Neal McCluskey. His déjà vu moment: A critique of the President’s proposal for free community college grounded in warmed over lobbyist talking points about how for-profit colleges serve students better than these public institutions.

Even if you did not read McCluskey’s piece, you may have enjoyed a very similar take from The Wall Street Journal’s editorial board or gotten the same facts from former defender of alleged cannibalistic dictators Lanny Davis in Forbes. You could also go right to the source: the major trade association that represents for-profit colleges.

Regardless of venue, the overall thesis is the same: community colleges do a worse job graduating students than their for-profit peers and are thus a bad investment choice.

Community colleges have their problems. Their overall completion rates can and should be higher. Some are an organizational mess. But the facts held up by McCluskey et al do not hold up to meaningful scrutiny.

The most dubious is the centerpiece claim about graduation rates. The typical talking point, which McCluskey repeats, is that around 20 percent of students at community colleges graduate, compared with over 60 percent of those attending for-profit two-year institutions. These figures come from the U.S. Department of Education’s Integrated Postsecondary Education Data System, a database of information reported by colleges themselves.

The key fact you need to know about these numbers—and one McCluskey elides—is that they don’t capture what type of credential a student sought or received. Community colleges mostly award associate degrees, which typically take a minimum of two years to complete. For-profits, by contrast, focus on certificates that can be earned in a year or less. In 2012-13, just 14 percent of first-time full-time students at for-profit colleges earned a credential that required two years or more of study; at community colleges it was 74 percent.

In effect, McCluskey and others are comparing the graduation outcomes of programs that can be just a few months against those that involve multiple years of study. It’s not a surprise then that the programs that require less to finish look better.

McCluskey defends the statistics he uses as being the best of what’s available. But that’s not quite true either. Every few years the Department conducts big longitudinal studies capable of correcting the deficiencies in the federal graduation rate. They can track things like student transfer, see what credentials they actually earned, and a host of useful data.

The results from these data are far more instructive in gauging how results differ between community and for-profit colleges. What they show is that within six years of entry, about the same share of students from either type of college have dropped out and have no degree—45 percent. About 46 percent of for-profit students have earned something, including 35 percent with a certificate, and 9 percent are still enrolled. Community colleges do have a lower overall attainment rate of 36 percent. But those who completed something are almost evenly split among earning a bachelor’s degree (11 percent), an associate degree (15 percent), and a certificate (10 percent). Community colleges also have two times the number of students still enrolled, with 30 percent of those in bachelor’s programs.

These data complicate the policy discussion. On the one hand, for-profits have a higher attainment rate in six years, but almost all of that is in the form of certificates. By contrast, community colleges provide a pathway for bachelor’s degrees that for-profit colleges do not and they have more students still enrolled in college that may ultimately complete and erase the difference in attainment rates.

Cost has to be part of this discussion as well. For profit colleges are much more expensive than community colleges, and that translates into greater debt levels for students. At for-profit colleges, 91 percent of those students who earned an associate degree had to borrow, taking out more than $20,000 in loans on average. More than half of those who started at a community college and earned an associate degree did not borrow at all and those that did had average debt that was more than $5,000 lower. And among students who dropped out—the most vulnerable group with the highest likelihood of defaulting on loans–just 29 percent at community colleges borrowed versus 94 percent at for-profits.

McCluskey also cites the fact that between 1990 and 2010 enrollment at for-profit colleges grew four times faster than at community colleges as evidence that the latter serve students better and are meeting a market demand. The growth story is a complicated one, however. It is true that programs at for-profits are often better suited for the busy lives of students—more convenient campus locations, more flexible hours, etc. But for-profit colleges also plow a ton of money into marketing and recruitment—almost one-quarter of their spending at publicly traded ones according to 2009 figures. When this works well, it means much better help filling out aid applications and getting grant (and loan) money for college. When it does not, it looks like what we’ve seen among some companies traded on Wall Street, where the quarterly assessment of new enrollment figures encouraged growth well past the sensible limit of stopping.

Plus, if you are going to credit for-profit colleges with their upward growth, it’s also worth noting that they’ve shed more students in the past year or two than community colleges, even as both shrink.

Community colleges, meanwhile, spend only a few hundred dollars to recruit each student. And their marketing can be laughably pathetic compared to the slick marketing at for-profits. States are also complicit here, since part of the attractiveness of for-profit colleges is fueled by insufficient public investment creating course scarcity.

There are some honest policy questions about the results achieved at many community colleges that can and should be asked given the large numbers of students they enroll. The president’s proposal for free community college would also bring greater accountability here by requiring them to offer programs that lead to four-year degrees or high-value workforce opportunities. Unfortunately, dredging up the same flawed talking points in an attempt to draw antagonistic comparisons is not going to get us there.

Ben Miller

Ben Miller is a senior policy analyst in the New America Foundation's Education Policy Program. He was previously a senior policy advisor in the U.S. Department of Education.