But these numbers only hint at the overall picture. As Deming and his colleagues explain, solid data on these students once they graduate is hard to come by, making it hard for researchers to really put a number on the economic returns of these degrees. The schools themselves haven't provided internal numbers, and there are additional challenges to measuring the value of online education. "The big challenge when students attend school online is it’s very hard to track them in survey data, because you don’t know where they are," says Deming.

Because of those challenges, Deming and his team decided to try an experiment: They sent fictitious resumes to measure employer perception of the value of for-profit colleges. They found that for business graduates, an online for-profit degree was 22 percent less likely to get a callback than a degree in a similar field from a non-selective public college. For jobs in the health industry, that number was 57 percent.

"If you talk to someone at a for-profit college, one thing they would say is that, well, the students we bring in are likely to have lower potential earnings whether they go to our school or not and so it’s not really fair to compare their earnings to people who went to public schools, and I think that’s a legitimate complaint with that kind of comparison," says Deming.

While that may explain some of the gap, it also is revealing: When for-profit universities fail their students, they are failing those who can least afford it. Their students are also those who lack higher-education options that work for more traditional students. Deming, Claudia Goldin, and Lawrence Katz found that students at for-profit colleges were disproportionately older, female, and African American. Additionally, a report by the Department of Treasury and Department of Education stated that 80 percent of students at for-profit colleges are the first in their family to attend college, with 51 percent of students coming from low-income families. The student body at for-profit colleges tends to be made up of what are called non-traditional students: They're older, and sometimes it's not their first time enrolling in higher education.

As federal money becomes more regulated, for-profit schools will face increasing pressure about producing better outcomes, no matter who they are serving. Deming says that the history of for-profit colleges is cyclical, and as the industry matures, he expects that for-profit colleges will specialize and find ways to survive. Stamping out for-profit colleges completely is likely not the answer, as it will reduce educational opportunities for those who have few other options. Moving forward, the policy question will become how to rebalance the incentives of these institutions so that they produce both profit for themselves and good outcomes for their students.

"At its root, the for-profit sector is addressing a really important issue which is access to college," says Deming. "A big part of this for me ...[is] in an environment where public support for higher education is declining and state appropriation has been dropping for years, who’s going to replace them?"

He added, "If they just go away and people aren’t getting degrees at all, that’s not very good either."

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