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Taxpayers’ Costs to Support Higher Education: A Comparison of Public, Private Not-for-Profit, And Private For-Profit Institutions

Robert J. Shapiro and Nam D. Pham

September 2010

Taxpayers’ Costs to Support Higher Education: A Comparison of Public, Private Not-for-Profit, and Private For-Profit Institutions1 Robert J. Shapiro and Nam D. Pham

I.

Introduction and Summary of Findings

The role of private for-profit institutions of higher education has expanded greatly in recent years. Demand for post-secondary education is up, especially for the career-focused curricula of most private for-profit colleges, universities and institutes. Further, the spread of Internet technologies creates new and highly-efficient channels for online learning, which private for-profit institutions have adopted more quickly than public and private not-for-profit colleges and universities. In addition, recent federal regulation of higher education tied to access to G.I. Bill and other federal student assistance has induced many private for-profit institutions to raise their standards and accreditation levels. The rapid expansion of these schools, however, also has raised questions about fast-rising expenditures for federal grants and loans to students attending for-profit institutions. This analysis examines all forms of federal, state and local government support across the three classes of higher education institutions – public, private not-for-profit, and the private forprofit institutions – and the three categories of four-year, two-year and less-than-two-year institutions. This analysis shows that concerns about disproportionate assistance to private forprofit colleges, universities and institutes are misplaced.  Private for-profit institutions and their students receive less than 30 percent of the support per-student from all levels of government provided to public institutions and their students, and less than 48 percent of the support per-student received by private not-for-profit institutions and their students.

In particular, government provides private for-profit institutions little direct support through government grants, appropriations and contracts to the institutions. On a per-student basis,  For every $1 in direct government support for private for-profit institutions, perstudent, at federal, state and local levels, private not-for-profit institutions receive $8.69 per-student and public institutions receive $19.38 per-student.

The rising demand for higher education reflects the economic value of that education, especially those who graduate. About 55 percent of American adults have attended some institution of higher education, and 38 percent have earned degrees. In 2007, those who held an associate’s degree, on average, earned 27 percent more than those with only a high school education; and those with bachelor’s degrees earned on average 83 percent more than those with                                                              The authors want to acknowledge the able research assistance by Jiwon Vellucci and Krista Ellis, and support for this research provided by Kaplan, Inc. The analysis and views are solely those of the authors. 1

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no post-secondary education. These differences were greatest for minorities and those from lowincome families. As a result, the number of students attending post-secondary institutions grew 35 percent in recent years, from 14.3 million in 1995 to 19.6 million in 2008. Moreover, over the same period, attendance at private for-profit institutions expanded 750 percent, from 240,000 to 1.8 million students. The three classes of institutions serve distinct if overlapping demands and aspirations: More than 98 percent of those attending private not-for-profit institutions are enrolled in fouryear programs, compared to 52 percent of those attending public institutions and 65 percent of those attending private for-profit institutions. Further, 47.5 percent of those...
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