When Is an 'Affordable' College a Bad Deal?

university students
university students

It's easy to imagine that the well-worn path from high school to college to gainful employment has always been the norm, but you don't have to look too far back into the past to find a time when that wasn't the case. Only after the GI Bill took hold following World War II did Americans start going off to colleges en masse. In fact, we only recently surpassed the milestone of 30% of U.S. adults holding a bachelor's degree.

That being said, Americans' drive to get an education is growing at an accelerating rate. Enrollment in degree-granting schools rose 38% between 1999 and 2009, an astounding jump considering the same metric grew by just 9% in the preceding decade.

And that growth isn't just happening at four-year colleges and universities. In 2011, a record 43% of students were enrolled in community colleges. And what was once a small niche -- for-profit education -- has burst outward, climbing from 366,000 students in 2000 to 1.5 million by 2009.

As these for-profit schools become more and more commonplace, it's worth investigating whether they are worth the price of admission.

Dollars and Cents

Other than health care, no expense for American families has increased as much over the past 10 years as college education, so students should weigh their options -- both public and private -- carefully.

Of course, not every school costs as much as, say, Sarah Lawrence, which -- when tuition and room and board are considered -- adds up to $59,170 annually. But based on broad averages, for-profit institutions generally sit in the middle of the pack.

Annual Tuition
Annual Tuition

Source: The College Board.

If you're after a four-year degree, it's almost twice as expensive to attend a for-profit school as it is to go to an in-state public university. If, however, you're strongly considering going out of state or to private school, there are considerable price advantages to picking a for-profit school.

Price is one thing; what about quality?

There are several ways to address the quality of schooling, and no method will ever be universally agreed upon. In the end, the student is the real judge of the quality of education he or she received.

But there are governing bodies in place that monitor how well schools meet national quality standards. In the past couple of weeks, stock in Bridgepoint Education (BPI), a prominent for-profit school, plunged 61% on news that it failed to meet the standards set by the Higher Learning Commission and the Western Association of Schools and Colleges. Bridgepoint, however, is just one company, and isn't necessarily indicative of the for-profit education industry as a whole.

If, however, you were to use graduation rates as your measure of a quality educational institution -- and after all, what are you studying for if not to get your degree? -- then for-profit options fail badly. Over four-, five-, and six-year periods, for-profit schools have abysmally low graduation rates when compared to both private and public nonprofit schools.


Source: The College Board.

The crucial thing to notice here is that public institutions -- which, if you pick an in-state school, cost half as much as for-profit schools -- have a graduation rate two-and-a-half times that of for-profits schools. After six years, fewer than one in four students at a for-profit school has earned the bachelor's degree they were aiming for. With numbers that poor, it's reasonable to wonder why anyone would enroll at a for-profit school in the first place.

It's All About Flexibility

Beyond the cost advantage versus out-of-state and private institutions, for-profit education also has the added benefit of providing the kind of flexibility most students can't find anywhere else. As most FPE schools have online courses, necessary work can be completed whenever works best for the student.

%Gallery-142181%That's in stark contrast to the historically rigid schedules most students expect when attending a traditional university. This may help explain why twice as many for-profit education students are over 24 years old, and are married or have dependents. They are also more likely to be working day jobs.

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Though that flexibility may sound enticing, based on the completion rates, clearly, many people who thought they could balance work, family and school weren't able to, and dropped out before graduating.

It's likely that traditional colleges and universities will soon catch up to for-profit education and start offering the same flexibility. But that doesn't help students who want to start working on a degree right now. For-profit schools should only be considered after the costs, quality, and potential outcomes are weighed. For far too many, for-profit education hasn't lived up to its promises; but if you go in with eyes wide open, there's a chance it could work for you.

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Motley Fool contributor Brian Stoffel does not hold any positions within the for-profit education sector. You can follow him on Twitter, where he goes by TMFStoffel. The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended writing puts on Bridgepoint Education.