For-Profit Colleges vs. Nonprofit Colleges

What’s the difference between For-Profit Colleges and Nonprofit Colleges? Do you know? And why it should matter to you…

Yes. There’s a huge difference. And yes. It matters big time.

First, let’s define the two:

Most colleges and universities are nonprofit entities. State universities and community colleges are usually (if not always) nonprofit. Many private colleges are also nonprofit. A non-profit college or university charges you tuition. Then they spend the money you give them on educating you. They use it to pay your professors and instructors, to provide cocurricular opportunities, to conduct research and to maintain their campus and facilities. In short, they pour all the money they make back into their school.

FYI: If you see me using “nonprofit,” “non-profit” or “not-for-profit” when designating colleges and universities throughout the website, rest assured I mean the same thing.

A for-profit college or university is owned and run by a private organization or corporation. A for-profit school charges you tuition, but doesn’t necessarily spend it on your education. Instead, they spend a good deal of it on marketing and recruiting. A for-profit college’s primary objective is to make money, and they usually have to answer to their stockholders — not their students. They usually don’t pay their professors and instructors as much as the not-for-profit schools do, which may well result in less qualified, less motivated teachers. They rarely provide cocurricular opportunities. They usually don’t conduct research, and they often rent the space they use as opposed to investing in a property. (Click here for a list of for-profit colleges and universities in the United States.)

Now, let’s compare:

Nonprofit colleges and universities are more likely to be regionally accredited. For-profit schools can be regionally accredited, but they often are not. If you are interested in a particular school, be sure to check on that detail before committing.

In general, non-profit schools have a better reputation in the real world and in the work force than do their for-profit competitors. Unfortunately, some of these for-profit schools have produced some less-than-stellar graduates. Some of these graduates have gone into the workforce and given these schools a bad name. Many employers have learned to distrust these institutions. It might not be fair to the individuals who graduate from these schools. They may well be bright and capable people, but they may be held back by which school’s name appears on their resume.

According to one study conducted by the Center for Analysis of Postsecondary Education and Employment, alumni of for-profit colleges tend to earn lower salaries than their nonprofit alumni peers.

And many of these students aren’t even graduating. According to The New York Times, your odds of earning a bachelor’s degree from one of the leading for-profit schools is about 1 in 5, within six years. Your chances of defaulting on the loans you took out to pay for this bachelor’s degree? About 1 in 4, within three years. Even if you did want to gamble with your education, those are not very good odds.

According to a recent report issued by Senator Tom Harkin, most students entering a for-profit degree program dropped out. The median time from starting to quitting? Four months. His study blamed this dropout rate on a lack of support for students.

This dropout rate may also have to do with the preparedness of the students who enter these programs. Many of these for-profit schools just don’t turn people away, whether they are ready for class or not. If I don’t have the skills to begin a degree program, and I apply to a not-for-profit school, my application is probably going to get rejected. If I don’t have the skills to begin a degree program, and I apply to a for-profit school, there’s a very good chance I’ll be accepted, whether I’m ready or not. Why? Because my check cleared.

For-profit colleges and financial aid:

Let’s focus on the money for a minute. Many of these for-profit schools heavily recruit low-income students whether making it part of the recruiting directive or through [unintended] systemic design. Why? Because these students qualify for financial aid. The school charges high tuition, and then financial aid kicks in to help pay for it. Some schools are getting as much as 90 percent of their revenue from federal financial-aid programs. But when a student drops out, the school gets to keep the money. The money doesn’t get returned to the taxpayers. This is causing taxpayers to hold a grudge against some of these for-profit schools. The taxpayers see their dollars going into the schools, but they don’t see qualified degree holders coming out. So, where is that money going? Or, more importantly to the person choosing a college, do you want to be associated with this school, or with this business model?

According to the Harkin study:

  • 96% of for-profit college students took out loans
  • 48% of four-year public not-for-profit students took out loans
  • 13% of community college not-for-profit students took out loans

In short:

Let’s be honest. It feels good to be wanted. And when we are recruited, we feel wanted. When a real college expresses interest in me as a student, it makes me feel good. These for-profit colleges and universities know this. And they use it. They recruit heavily. They recruit far and wide. They are at the college fairs. They are at the job fairs. They are everywhere. If you find yourself facing a pushy recruiter, ask yourself, why does this school want me so bad?

We need to remember that when for-profit colleges look at potential students, they see dollar signs. They may say nice things to me and make me promises. They may tell me I’m accepted and tell me they want me. But this doesn’t mean that they care about my education. This doesn’t mean that they will work very hard to educate me.

For-profit schools can also be incredibly convenient. The application process may seem simple. The registration process may be easy. There may be small class sizes and convenient locations. But convenience doesn’t necessary translate to good. Be careful not to get swept away by the convenience of it all.

For-profit schools are also often easier to get into. According to NCSL, enrollment at for-profit institutions increased 225 percent over the past twenty years. These schools aren’t turning a lot of people away. But that doesn’t mean you have to go there. With a little work, you may well find a nonprofit university that will meet your needs. And you’ll likely save a pile of money, have a better experience, and come out with a more valuable degree.

A word to students not seeking degrees:

Many careers require further education or recertification. If your job is asking you to take a course or two, a for-profit school might be a great option for you. The application process is usually simple and the schedule is usually flexible. Just make sure the school you choose is accredited, in case you ever want to transfer those credits.

News:

Visit the National Conference of State Legislatures to read about how lawmakers are working to better hold for-profit colleges and universities accountable.

And check out this Frontline report on for-profit colleges and universities.

And remember:

Never, ever, ever go to a college or university without talking to someone who has already gone there. Get the inside scoop before you commit! Don’t know someone who has gone there? Ask someone at the admissions office to refer you to some alumni. Then ask the tough questions!

12 Comments… add one
deborah l. brandt

i am presently attending globe university which is a for profit school. so far i feel that there is great attention given to succeed in my program. i do agree, however, that some of the students i see in class just do not know what is going on. it seems they are not prepared for the classes and often are late for them as well. i can not fault the teachers for that. i would be curious to know what information you have on this school. thank you for the article, but remember as well the power of decision rests on the individual. teachers are not supposed to be babysitters. cheers! deborah

Radek M. Gadek

Hi Deborah,

Globe University is a school I would not recommend if you’re pursuing a degree like an Associate’s or Bachelor’s. My reasoning behind it is the for-profit nature of the institution and lack of regional accreditation. Please see my articles on accreditation for more info.

As mentioned in the article, I would consider going to a for-profit college or university for self-growth or certification/recertification purposes only.

John Anderson

I am currently attending South College in Knoxville, TN. It is a regionally accredited college by the Southern Association of Colleges and Schools. South College is a for-profit school and I have also talked with past students who have graduated and have gotten jobs. Would you consider this for-profit school different because it is regionally accredited?

Radek Gadek

Hi John,

Not really. I don’t know much about your college and most of the popular for-profit schools are regionally accredited. At least that’s some good news.

Not knowing the difference, I went to one, too.

After I graduated with a 3.96 GPA, it was very difficult applying into a Master’s program and I had to get my hands on premium letters of recommendation and write a killer personal statement. All are things one should do when applying to grad school, but mine had to be extra better – the school reps implied. I was explicitly told that the school I went to was not well regarded and that I needed to convince the admissions committee to overlook that fact. Hence I worked hard on everything that needed to happen in order for my application to be considered.

I felt I was well prepared, well educated. But the for-profit stigma follows you whereever you go. It followed me. I applied to three schools:

  • Boston University
  • Michigan State University
  • University of Cincinnati

I got into all three, and after a long deliberation, I chose Boston University where I carried a very high GPA as well.

So that’s my short story.

Yes, graduates will get jobs and they will get promoted if they needed higher academic credentials to get that promotion. But, I know it is THAT much more difficult to obtain a career at a place that the applicant truly wants to work for. Also, keep in mind that certain schools, for-profit or not, may be well regarded in the immediate region. It’s rare to see that for-profit schools would have such positive radiance, but if the school graduates well-prepared individuals, it might just be enough to entice employers to hire such graduates.

If I knew what I know now, I would have transferred to a State University (that’s if they don’t scrutinize the heck out of my credits first… you know they would). To mitigate earned credit loss, best bet would have been to transfer at the early stages of my degree. Would have. Could have. Should have.

Regardless of the stigma for-profit schools get, I am proud of my education. I have earned my Bachelor’s degree. Would I do it the same way again? No.

Tracy

I currently work at a “for-profit” career school and I agreed with most of what your saying until I read the financial aid portion. We do not recruit “low-income” students. That is highly frowned upon in the eyes of the government. Also, we adhere to the same financial aid rules and regulations that non-profit schools do. If a student drops out of our program, we are required to calculate the amount of financial aid the student has earned and that is all we can keep. We return the unearned portion back to the government. The high percentage of students taking out loans is due to the majority of state and government grants apply of degree issuing schools, which my school is a certificate/diploma program, so students have no other choice. I pride myself on being an honest, ethical person and I took great offense to you insinuating we “steal” from taxpayers.

Radek Gadek

Hi Tracy,

Thanks for the passionate reply.

I mostly write on colleges and universities in the scope of higher education with the intent of furthering academic and career opportunities. This website doesn’t make it a point to write on career schools, but I may sometime.

I’ll try to address some of the items you mentioned as we go from the perspective of the article in question and my own.

There are numerous investigations conducted by the U.S. Department of Education and state agencies, and particularly including umpteen Channel 5 News Investigative Teams and droves of average Janes and Joes that show how people are duped into signing their next 2 to 4 years away, even if they aren’t qualified financially and/or academically. Perhaps, over the years, the company directives have softened, or even changed entirely, and I DO hope this is less prevalent, but the fact that students are not or were not told what they are getting into at some of these institutions in a straight manner, worries me.

Facts are facts… perhaps it’s not “YOU” that is recruiting low-income students, or maybe it’s not even a departmental directive at your organization. But if you look at the many for-profit schools, like the Harkin Study directly supports, an overwhelming majority of students had to take out student loans thus shedding some light on the status-quo: low income students, whether directly targeted or by systemic design of the institutions, are the ones taking the brunt of the crippling debt after leaving/graduating from what often is a costly for-profit education. If the debt is not paid off, the taxpayers eat it (you and me included).

This is not my first rodeo… I worked with hundreds of students who have horror stories as well as success stories when it came to their for-profit education. Heck, I’m one of them – you could say: “a success”. But, we paid dearly [$$$ + time] for an education that often gets questioned by employers and academic institutions. “How my degree will look in an interview or on a college application” is the usual topic filled with confusion, resentment, denial, grief and at some point acceptance. And, there are those that paid much more with accreditation woes and school closings; owing money and often wasting years of life to not receive a [valid] degree or even a [valid] transcript (those are the extreme cases).

Please remember that you work for an institution that has members and shareholders looking to profit from their endeavors. Plain and simple… to them it’s just business. The directive, whether you believe it to be or not, is to make money while avoiding any type of scrutiny and regulation that may hinder enrollment rates; negative media and social backlash; loss of revenue.

Maximizing the bottom dollar is paramount for many for-profit institutions. Still, saying that, some for-profit schools do it right – ethically and keeping students a close second. In my experience, it’s a relatively small percentage of all the for-profit colleges and universities out there.

There are good and bad for-profit companies out there. Some make it a point of balancing people and profits. Some even prosper when they put people first.

The for-profit education industry didn’t get itself muddied over a short span. These schools have been in existence for many years. The avarice of some of these organizations has spread onto others and soiled the reputation of the much more reasonable and ethical for-profit institutions (perhaps the one you work for), which at this time have to defend themselves and the for-profit education industry as a whole.

Despite this stigma, there is an invasion of television ads, radio ads, Internet radio ads, billboards, search/Web ads and even organic search results (through expensive Search Engine Optimization campaigns) — directly resulting in student enrollments at the for-profit colleges and universities. From a business perspective, that’s money very well spent.

– Radek

P.S. I want to make it a point that this article is not meant to be a “witch hunt.” I write based on research and experience, and yes, often from the heart. I’ve seen and heard things that would leave anyone with their mouths gaping [Grand Canyon proportions] when it comes to practices from student acquisition, to attrition, all the way to post-graduation on both sides of the for-profit/nonprofit coin. I find such practices disproportionately more on the for-profit side of the coin. Also, I wanted to address the words I used in the financial aid section of the blog post that say “many” and “some.” These words should not be interpreted as “all”. They don’t mean “all.” I sincerely hope that your school is as good of a corporate citizen as you think it is. Kudos to you and your team if that’s the case. More often than not, I find opposite to be true. Thank you.

Mitra Nas

Hello Radek,

It’s funny I should stumble upon your report right when I needed some guidance and further information.
I’m hoping you could share your insights on my case.
After months of research and deliberation, I decided to complete my undergraduate Business Administration degree at one of many online universities. The reason for this is that I’m only short 35 credits (in a semester system) and online schools accept more transfer credits than traditional “campus-going” B&M universities.

I have narrowed everything down to two online universities: Colorado State University-Global Campus or Capella University. The former is, as the name implies, a public not-for-profit university. The latter, on the other hand, is a private for-profit one. Both are regionally accredited by the Higher Learning Commission.
The most important factor influencing my decision is that I intend on going to a prestigious university for my graduate studies. That is my ultimate goal and influential factor in my decision between the two schools.

Since you have been down a road similar to the one I plan to take, I would appreciate any information or opinions you might be willing to share.
Thanks! Mitra

Radek Gadek

Colorado State… All. Day. Long.

DeVry

So basically…
Non-profit = we will support you in every way possible and land you in a career 🙂
For-profit = WE FOLLOW THE LAW AND WE NEVER BREAK ANY OF THEM. MAKE SURE TO READ THE FINE PRINT WITHIN THE FINE PRINT AND PAY US BACK. WE FOLLOW ALL THE (minimum) REQUIREMENTS TO EDUCATE OUR STUDENTS.

Renee Walker

I’m in the middle of watching Frontline’s College Inc. on PBS which I believe came out in 2010. I have more than 150 credits and no Bachelors degree. I am prior military and now that I am out and life has settled down, I really need to finish my Bachelors. One of the things that makes it a challenge for me is that almost all colleges have an academic residency requirement which would require me to take more classes than what I truly need to complete a degree. By accident, I stumbled upon a forum which discussed the “big three” – Charter Oak State College (Connecticut), Excelsior (New York), and Thomas Edison State College (New Jersey). TESC and COSC are regionally accredited not-for-profit public schools and Excelsior is a regionally accredited not-for-profit private school. Do you have any opinions concerning these schools which offer alternative ways of earning a degree? I’ve had several discussions with COSC in particular and it appears I’d only have to take 5 classes with them to complete my BS but I don’t want to move forward with it if employers will deem my degree to be worthless. Thanks.

Radek Gadek

Hi Renee,

I am not very familiar with these schools, but I can tell you your degree is not worthless because you may have attended college online. When you graduate, the diploma and the transcripts you get will be as meaningful as if you have earned them by physically “going” to college. The American educational system is evolving and more and more people, especially the younger generation (recent high school grads), have no qualms of going to college or university online.

Tiffany

I’m really confused on what college I should attend. I currently attend Ashford University online, and I must say I’m not very happy. I was thinking of SNHU. Could you please give me some insight. I never thought of the whole profit and nonprofit thing. Thanks for your time.

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