Guide to For-Profit Colleges: What You Need to Know
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For-profit schools benefit from name recognition and big promises. But for most students, a for-profit school represents a bad investment.
Not-for-profit schools, including public colleges and private nonprofit colleges, make educating students their primary mission. For-profit schools exist to make money.
First, consider how much schools spend on student instruction. For-profit colleges spend an average of just 29 cents on student instruction for every dollar in tuition. Private colleges spend 84 cents, and public colleges spend $1.42.
Second, consider advertising. For-profit schools spend $400 per student on ads, while public institutions spend $14 per student.
There is good news for students considering a for-profit school. They can almost always find the same program offered at a lower cost through a community college. This page introduces for-profit colleges so students know how to avoid predatory schools.
What Is a For-Profit College?
A for-profit college confers certificates, diplomas, and degrees at the postsecondary level. However, unlike nonprofit colleges, for-profit schools primarily aim to make a profit. Investors and shareholders expect to earn money from the school. As a result, for-profit colleges generally cost more.
Purpose and Business GoalsFor-profit colleges operate to make money. While educating students represents the primary purpose for a nonprofit or public college, for-profit schools attempt to limit costs, increase revenue, and report profits. The for-profit model can shape factors like admission standards, tuition rates, and financial aid opportunities.
FundingColleges often rely on multiple funding sources, including tuition, endowment funds, and government grants. For example, public colleges receive funding from the state government. For-profit colleges receive money from investors who expect to recoup their expenses. As a result, for-profit colleges have a strong incentive to cut costs and drive up profits.
Tuition and AffordabilityThe posted tuition rates at for-profit colleges typically exceed public schools but are lower than those at private nonprofit institutions. However, students at for-profit colleges receive fewer scholarships and loans. They also graduate with more student loan debt. In 2021, for-profit institutions enrolled 10% of all college students and accounted for half of all student loan defaults.
Types of Programs OfferedFor-profit colleges tend to offer trade-focused programs like engineering technology, medical coding, culinary arts, cosmetology, and automotive technology. Keep in mind that many community colleges also offer vocational degrees at a much less expensive price tag.
AccreditationAccredited schools meet high standards for educating students. Regional accreditation remains the highest standard in postsecondary education. Many for-profit schools hold accreditation from national accrediting agencies. These agencies use different standards than regional accrediting agencies. Some for-profit schools also list unapproved accrediting agencies. As a result, prospective students should research accreditation before applying to colleges.
AdmissionsFor-profit colleges typically admit students with lower academic credentials. Most do not require standardized test scores. Some admit all applicants regardless of their GPA. While this might appeal to applicants with a lower GPA or test scores, the open admission policy serves for-profit colleges. They make more money if they admit more students.
Ability to Transfer CreditsThe credits earned at a for-profit college often will not transfer to other schools because for-profit colleges do not hold regional accreditation. Instead of transferring credits to other schools to complete a degree, for-profit students must redo their coursework and pay twice for the same credits.
Course Scheduling and FlexibilityMany for-profit colleges tout flexible schedules, online course options, and programs designed for working adults. They may offer asynchronous courses that better fit the schedule of busy students. However, many community colleges, public universities, and private nonprofit colleges also offer flexible enrollment options.
Student ActivitiesFor-profit colleges tend to offer fewer student activities and student services than nonprofit schools. Providing services like an academic library, student counseling services, or tutoring increases costs. Students at for-profit schools may feel less supported by their institution and find themselves missing out on some typical college experiences.
What Are Examples of For-Profit Colleges?
Many for-profit colleges advertise heavily. They also often choose names that sound like legitimate, not-for-profit colleges. As a result, students might face confusion when researching colleges. Below are some well-known for-profit colleges.
- DeVry University
- American National University
- Berkeley College
- Grand Canyon University
- University of the Potomac
- Strayer University
- University of Phoenix
- Walden University
- American Public University System
- Capella University
What Is the Difference Between For-Profit and Nonprofit Colleges?
What is the difference between nonprofit and for-profit colleges? Nonprofit colleges treat educating students as their primary mission. For-profit colleges operate to earn a profit for their shareholders. This fundamental difference shapes education at nonprofit and for-profit institutions.
When it comes to academic quality, nonprofit schools consistently rank higher. A 2021 report classified four out of five for-profit colleges as high-price, low-quality institutions. Less than 16% of for-profit colleges ranked as high-quality institutions.
For-profit colleges tend to focus on vocational and trade-focused training. However, many two-year colleges offer similar programs at a lower price and with higher quality.
Reputations of For-Profit Colleges
For-profit colleges have earned a negative reputation for providing low-quality education and leaving students saddled with debt.
According to a 2021 study, for-profit colleges are much more likely to close, leaving students and graduates with no institutional support. They also report much lower graduation rates. Over 40% of Black students at public and private nonprofit universities graduated within six years. Only 14% of those at for-profit colleges ever earned a degree.
Pros of For-Profit Colleges
While most students should avoid for-profit colleges, they have a few benefits. For example, for-profit colleges tend to focus on vocational education and often prioritize flexibility.
Students may find it easier to gain admission at for-profit colleges because they generally report higher acceptance rates than nonprofit or public institutions. This benefits applicants with a lower GPA or low test scores. However, community colleges typically do not require test scores and admit applicants with a low GPA.
Many for-profit colleges focus on vocational training. These trade schools train students in areas like automotive technology, engineering technology, and allied healthcare. For some students, a vocational degree offers career advancement and a higher earning potential. Keep in mind, however, that many nonprofit and public colleges also offer vocational degrees.
For-profit colleges often offer flexible schedules, including night and weekend classes. In addition, most offer part-time enrollment options. Students can also enroll in an online program to earn their degree. The lifestyle flexibility appeals to working adults, student parents, and others with busy schedules. However, this flexibility can be found at many community colleges and private and public nonprofit universities as well.
Cons of For-Profit Colleges
For-profit colleges come with several major downsides. Graduates take on more debt, cannot transfer their credits, and may struggle to find jobs. For most students, the cons of for profit-colleges outweigh the pros.
Graduates of for-profit colleges tend to walk away with more debt. In 2018, 66% of public college graduates and 75% of private nonprofit graduates had student loan debt that averaged $25,550 and $32,300, respectively. However, 88% of for-profit college graduates had loans with an average debt of nearly $40,000.
For-profit colleges generally hold a negative reputation. Some essentially operate like a diploma mill, granting degrees with low standards or without even requiring coursework. Graduates may struggle to find jobs as a result of the negative reputation of for-profit colleges.
A for-profit college can harm a graduate's job prospects. Many employers avoid hiring candidates with a degree from a for-profit college. The degree may not meet the requirements for professional licensure or certification. Graduates might find themselves shut out of the job market after earning a degree or certificate.
Public and nonprofit colleges prioritize the best interests of students. Many of these institutions incorporate student learning outcomes into their academic missions. For-profit colleges, in contrast, often do not put students first. They operate to make money rather than treating education as their primary mission.
Many college students transfer at some point in their postsecondary education. However, for-profit colleges typically do not meet the requirements for transferring credits to other institutions. In particular, students struggle to transfer credits into regionally accredited colleges and universities. Transfer students must redo their prior coursework — and pay for it twice.
Common Questions About For-Profit Colleges
The College Scorecard lists whether a college operates on a for-profit or a nonprofit or public basis. The site, run by the Department of Education, also provides information on graduation rates, cost, and average salaries of graduates.
A for-profit college can hold accreditation from national and programmatic accrediting agencies. However, they typically do not hold regional accreditation, which is considered the highest standard for academic programs.
No. A for-profit degree does not pay off in most cases. With low graduation rates and high student debt, for-profit schools often represent a poor investment.
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