What is the Difference Between a Non-profit and a For-Profit College?

Picking which college to attend is one of life’s biggest decisions. There are so many factors to consider. For instance, would you prefer a big vs small school? Do you want to live on campus or study online? Are liberal arts or technical colleges better for your major? The questions to ask yourself are virtually endless. However, one question you’re likely overlooking is whether you want a non-profit or for-profit college. Every post-secondary institution is labeled either “nonprofit” or “for profit” based on their financial structure. According to the U.S. News & World Report, there are 4,298 colleges nationwide. Of them, there are 3,313 public or private nonprofits and 985 for-profits. For-profit university enrollment has dropped 19 percent since 2018. What is the difference between non-profit and for-profit schools? In this article, we’ll look closely at the two college types to help you decide which is best. 

Definition of a Non-Profit University

Non-profit colleges are higher learning institutes that aren’t focused solely on profits. The majority of American universities have a non-profit model. Making money isn’t the motivator for their operations. These colleges budget carefully to simply break even on their expenditures or money spent. Any income made is put back into its educational services. Greedy executives at the top don’t gobble up the profits. In other words, non-profit schools reinvest their revenue in improvements. Profits might go toward hiring faculty, building new facilities, or expanding programs. The primary focus of non-profits is delivering high-quality education for career development. Public colleges are funded by the state government using taxpayer money. Private, non-profit schools receive funding from churches, foundations, and individual donors. They’re run by a president or chancellor and board of trustees rather than one CEO. Upper-level management at nonprofits set policies that further educational goals not profits. 

Definition of a For-Profit School

Now, what does it mean when a school is for profit? It’s the exact opposite of the first definition. For-profit colleges are corporations that strive to rake in money. For-profit schools see education as a business service they’re providing for the price of tuition. Delivering quality classes is important for good reviews that attract new paying customers. However, keeping the bottom line profitable is their major focus. For-profit companies are funded entirely by what students spend and private investors put up. Most for-profits are managed by a well-paid Chief Executive Officer. The owner structure means that tuition and fees can skyrocket anytime on their whim. Most revenue goes toward lining the pockets of shareholders with a stake in the company. Several are even publicly traded on the stock market to get share owners wealthier. Profits are also used for advertising to get more students enrolled. Churning out more graduates to raise earnings is their mission. For-profit education is a lucrative, multi-million dollar sector. 

How to Determine Nonprofit Private vs For-Profit Status

Are all private schools for profit? Absolutely not! Most for-profit colleges don’t advertise their status on their website since potential students might be turned off. Luckily, finding out which higher education institutions are non-profit and for-profit for yourself is easy. Head over to the National Center for Education Statistics’ College Navigator tool. Simply type in the school you’re considering in the search box. Click on the right university and campus location from the results page. On the profile, you’ll find for-profit or non-profit listed under school type. Click on the “general information” tab for further details. Pay close attention to the federal aid section. This will tell you whether the for profit school qualifies for FAFSA funding. As a side note, look at the average cohort default rate too. This number tells the percentage of students who can’t repay their borrowed student loans. Inside Higher Ed warns that for-profits have the highest mean default rate of 15.2 percent. Failing to repay lenders leads to bad credit and garnished wages.

Pros and Cons of Non-Profit Colleges

Since non-profit schools focus on student success over profits, the academics are better. Courses are more rigorous to build in-depth skills employers seek. Non-profits, especially in the Ivy League, have easily recognizable names that may impress recruiters. Nonprofit colleges have strict hiring standards for highly qualified, PhD-level faculty. Most non-profit schools have low student-faculty ratios to keep class sizes small enough to engage. More student resources, such as tutoring, career advising, and internship placements, are available. Learners get more involved in an interactive campus climate. Joining special interest clubs, professional associations, and sororities or fraternities is common. On-campus amenities at nonprofit schools usually include residence halls for a traditional college experience. In 2019, The Chronicle of Higher Education reported a high four-year graduation rate of 53 percent at non-profit colleges. Ergo, the majority of students finish on time to avoid extra time and money expended. 

Nonprofit universities are considered superior to for-profit ones. Yet, there are some potential drawbacks to non-profit schools. There are generally more liberal arts core requirements than career-focused courses. Small nonprofits are sometimes homogeneous with little student diversity. Many non-profit colleges have a limited availability of online options. Adult students may have to compromise on their major to study online. Even online classes might have a hybrid component that requires traveling to campus. Being within commuting distance restricts the number of non-profit schools you can choose from. Transportation costs, such as gas, car repairs, and parking fees, can get steep. Private, nonprofit colleges are already really expensive on their own. Financial aid is abundant, but there’s no guarantee you’ll receive any. Students from upper middle-class families might not qualify for federal financial aid. Taking out loans that accrue interest could be necessary to afford the $30,000 or more each year. 

Pros and Cons of For-Profit Schools

For-profit colleges typically offer all or most of their degrees online anytime 24/7. Simply an internet connection is required to take their flexible courses. Non-traditional students benefit from making their own schedule while working a full-time job. Online content is delivered right to your laptop or tablet for studying comfortably at home. For-profit colleges specialize in vocational programs that have few liberal arts courses. Many focus on one trade, such as for profit nursing schools, to build career skills in in-demand professions. For profit universities rarely turn away students willing to pay their price tag. Lax admission requirements mean nearly anyone with a high school diploma or GED is accepted. Frequently, for-profit schools are also faster. Accelerated online formats shrink the traditional 16-week semester into shorter chunks. For-profit programs might accept life or work experience credits to cut your curriculum down. Competency-based education is increasingly popular to measure aptitude instead of total credits.

Nonetheless, the private for-profit meaning tells us where the school’s priorities are. Making money is supreme. For-profit universities are notorious for lying and tricking students to increase their wealth. Out-of-pocket tuition costs could be higher with less financial aid opportunities. In 2019, CNBC reported on a Congressional bill that could soon make for-profit schools ineligible for federal grants. Less academic and social support should be expected too. Online for-profit colleges just rent out office space for their headquarters. There’s no campus to engage in clubs and attend networking events. Interaction with peers is limited to a computer screen, which can hurt your communication skills. For profit schools generally have bigger classes with less faculty attention. Adjunct professors with less training and fewer credentials are common. Low academic standards may affect your future job prospects. Employers could be biased against for-profit colleges and refuse to hire you.

Warning for Students Choosing For-Profit Colleges

Non-profit schools aren’t immune to bad practices, but for-profit ones are guilty more often. Choosing a for-profit college is a risky move that requires plenty of research. That’s because several for-profit schools are actually diploma mills. A “diploma mill” is a phony institution that schemes its students. These fraudsters basically sell college transcripts rather than teach. They offer bogus opportunities to graduate in a few months or less. Writing a big check that clears is what matters most, not your academic experience. It’s estimated that these more than 400 sham schools make upwards of $200 million each year. Criminal prosecutors are constantly shutting down for-profit diploma mills to protect consumers. For example, the Florida Attorney General Ashley Moody sued Ellenwood Academy in 2019 to stop its online scam. Keeping diploma mills in check is like whack-a-mole because new ones seem to pop up daily.

For-profit colleges are often criticized for promising positive results to their students. Unfortunately, the actual math doesn’t support their claims. Forbes found that the average cost of for-profit schools is $466 more per credit. Bachelor’s students would fork over $38,640 more on average for their four-year degree. Graduates of for-profit universities then face worse hiring chances to pay back their ballooning debt. Unemployment rates are nearly five times higher than at non-profit schools. Therefore, it’s fair to say that the higher price tag doesn’t usually pay off. Expensive for-profit institutions have been known to prey the most on at-risk student populations. The majority of for-profit colleges target low-income, first-generation people of color and immigrants. Non-traditional women age 25 or older who are returning to school are sought after. Active-duty and veteran Armed Forces members are also recruited by for-profits wanting to take their GI Bill benefits. Be careful you’re not falling into a trap they set.  

What to Look For in Good For-Profit Schools

One sure way to protect yourself is to only apply to accredited institutions. Are for profit colleges accredited? Yes, the best for-profit schools are regionally accredited. Regional accreditation is an institutional review process done based on the college’s main location. Six U.S. regional accrediting agencies are approved for New England, Mid-Atlantic, Southeast, Midwest, West Coast, and Pacific Northwest states. Regional accreditation assures you that the education will meet high quality standards and be transferrable later. National accreditation doesn’t give quite the same guarantee. For-profit schools that are nationally accredited might not qualify for credit transfers or financial aid programs. National accreditations, such as the DEAC and ABHE, are better than none though. Use the Council on Higher Education Accreditation website to locate accreditation information. Be on the lookout for for-profit colleges with accreditations you’ve never heard of. Sneaky diploma mills make up hundreds of fake accreditations. 

Even when accredited, some for-profit colleges deserve your suspicion. Do your homework to investigate the institution before enrolling. Use the Better Business Bureau to read about other students’ complaints. Check for high A ratings that indicate an ethical company model. Conduct a Google search for the university with the term “lawsuit.” This will bring up any pending court cases the college is involved with, which would be a flaming red flag. Take the time to contact the admissions office directly. Ask about your desired program’s academics, admission requirements, and faculty. The worst for profit schools won’t even list the professors they employ. Avoid any for-profit colleges that have a PO Box instead of an actual street address. Don’t give out private personal data, like your social security number, that could be stolen for identity theft. Don’t fall for diploma mills that specialize in helping international students immigrate either. Do a diligent review and listen to your gut when shopping for credible for-profits.  

Overall, non-profit and for-profit colleges have one major difference – their financial goals. Nonprofit institutions don’t make money a motive. Non-profits use state or private funding to pay off their expenses. Remaining revenue is reinvested right into the educational programs. As the name suggests, for-profit schools focus on accruing capital for shareholders. For profit businesses do anything necessary to turn profits that keep investors happy. Balance sheets and bank statements matter more than the actual academics. For-profit schools give their earned income to company bigwigs and reinvest little in comparison. Is a for profit school bad? Non-profit colleges are held in higher regard and more widely respected. Sometimes, for-profits are scams or diploma mills that deceive vulnerable students. Most for-profit colleges are good, accredited institutions that teach adults specialized trades online though. Now that you know the difference between a non-profit and a for-profit college, you can decide which works for you.

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