New study estimates annual economic impact of career colleges at $38.6 billion

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Career College News

by Kerry Turner

2007 Fact BookThe Imagine America Foundation has released the first ever comprehensive study of the economic impact of the career college sector. The study, The Economic Impact of America’s Career Colleges, estimates that career colleges generate $38.6 billion in annual impact to the U.S. economy. This total includes $14.6 billion in direct institutional impact, $4 billion in related student fees and expenses, $3.5 billion in higher career college graduate starting salaries and other benefits, and $16.5 billion in indirect economic activity associated with the industries in which the graduates are employed.

The following are notable findings in the study:

Direct Impact

In educating students (37 percent of whom are minorities) for high-demand jobs, the career college sector generates significant economic activity as a result.

  • A total of 2,694 career colleges (for-profit, Title-IV eligible institutions) in the 2004-2005 academic year produced $14.6 billion in total revenue. Institutions spent nearly $8 billion on compensation of employees and $5.6 billion for goods and services, including real estate, administrative and support services, construction, and other needs.
  • During 2005, career colleges employed 137,041 full-time equivalent faculty and staff.
  • While the federal and state subsidy to not-for-profit institutions of higher learning is approximately $22,000 per student, students at career colleges receive approximately $6,500 in student assistance.

Student Benefits

  • Career college education adds a significant earnings boost over that earned with only a high school diploma. Across the board, the weighted mean of earnings by education level for career college completions is $39,546. The median annual earnings of a high school graduate are $30,316.
  • Three-quarters of career college students reported higher earnings with their degrees, while only 56 percent of graduates at public institutions did so.
  • During 2005, 495,474 students completed career college programs. Of this number, 376,560 (or 76 percent) were employed immediately upon completion.
  • Career college graduates in 2005 generated $3.5 billion in total income above and beyond what they would have received as high school graduates.
  • Healthcare dominates career college completions, with over 180,000 in 2005-2006. Other top career college fields of study are personal and culinary services (82,000); business, management and marketing (70,000); and computer and information services (36,000).

Return on Investment

For students who invest in their careers by paying tuition and for governments that invest in a highly skilled workforce through loans and grants, career college sector returns are excellent.

  • On an individual basis, career college graduates paid an annual average of $1,500 more in federal taxes than high school graduates.
  • An individual career college graduate earning an Associate degree would produce lifetime earnings of $1.6 million or $337,127 more than those with a high school diploma alone.
  • Career college graduates paid total federal taxes of $1.6 billion in 2005 or $565 million more than they would have paid as high school graduates alone.
  • Career college graduates not only earn higher salaries, but they also reported that they have better job opportunities and are able to take on more responsibility than their public institution counterparts reported.
  • The study estimates career college students enjoy a 31.3 percent return on their investment. Study economists base this estimate on a total student investment of $29,533.

Career colleges include for-profit postsecondary schools, colleges and universities that offer market-driven, career-specific training in over 200 fields. They differ from most public and non-profit postsecondary institutions in their emphasis on providing students with skills most in demand by employers. Career college students are predominantly working adults. Almost 50 percent are the first generation in their families to pursue higher education.

To obtain your free copy of this study, contact Foundation staff member Kerry Turner at 202.336.6711 or kerryt@career.org.