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What is a For-Profit College?
For-profit colleges are schools which hold the ultimate mission of creating profit for their stockholders, which can sometimes conflict with the interests of their students. They typically put much less of their students’ tuition money back into their education, instead spending it on advertisement, payouts to their stockholders, and other expenses which the students do not benefit from.
In this article, we’ll discuss exactly how for-profit colleges work, how they differ from not-for-profit colleges, and why they exist. Finally, we’ll give you a list of some for-profit colleges to identify, and offer some alternatives to choosing a for-profit college for your education.
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Typical characteristics of for-profit schools
At its root, the difference between for-profit schools and not-for-profit is exactly that: for-profit schools seek a profit, whereas not-for-profit schools exist solely to provide the best educational experience they can. But how exactly does that manifest? Here are some typical characteristics you can expect of for-profit schools:
For-profit schools are often run with shaky finances and questionable management. Extra tuition money is not saved and put back into the educational institution – it ends up in the pockets of shareholders and executives. As a result, many for-profit schools do not have a solid foundational base and are prone to closure.
From the point of view of the executives, the closure of a for-profit school is not necessarily a loss. As long as they managed to make money from the operation, they have succeeded. This, however, is not the case for not-for-profit schools. not-for-profit schools exist to create educational legacies and to continue educating students. As a result, they have an incentive to make decisions which ensure longevity instead of paying more money to their higher ranking staff.
Low expenditure on students
Because for-profit schools are always working to maximize profits, the same as any other business, they try to minimize their costs. One of their main costs is their student population. Spending more money on educational resources like more experienced professors, high-quality classroom equipment, and college networking resources, could all be written off as a money-sink for colleges; they do not get a direct financial return for it.
So, for-profit schools have an incentive to spend as little as they can on each student in order to make the most money. They instead spend their money on expenses such as advertising, to recruit more students (or as they view them, customers). In fact, according to a 2020 study, for-profit colleges spend about $400 per student on advertisements on average. Compare this to the $14 spent by not-for-profit colleges, and you’ll see a big disparity.
In fact, a 2020 study showed that only 29 cents per dollar of tuition at for-profit schools is spent on instruction. not-for-profit private schools, on the other hand, spent 84 cents, and public schools, $1.42. Even though for-profit schools may be cheaper, their students receive less of their money back in the form of education than any other model of education.
Low alumni resources
You’ll notice by now that a recurring theme among for-profit colleges is cutting corners. Alumni networking is not exempt from this trend. For-profit schools generally do not invest significant funds into infrastructure to help alumni connect.
This is a notable difference, as many college graduates go on to find jobs through their alumni networks. Attending a college gives alumni a sense of pride and a sense of connection to people who attended their school. This often encourages them to recruit talent from their school, and it is a substantial way that people find jobs after graduation.
Easy to gain admission
One way that for-profit schools manage to recruit students is through their low admission requirements. Students with low GPAs and test scores can often gain admission to for-profit colleges. This is because for-profit colleges are more concerned with finding paying customers than they are in cultivating a student population.
If you struggled in high school and/or have trouble taking standardized tests, this might seem enticing. But you should remember there are other options out there who are not concerned with your GPA or test scores. You could attend a community college, and plan to transfer into a four-year program after you complete your program.
Another option is to look into four-year college alternatives. These include coding bootcamps, apprenticeships, certificate programs, and a host of other options. Many of these options can prepare you for a high-paying job for a fraction of the time and money that a four-year degree requires.
For-profit institutions aim to maximize their student population in order to maximize profits through tuition. As a result, they will remove as many barriers to their educational experience as possible. As a result, they have very flexible scheduling options in an attempt to accommodate as many students as possible.
They typically offer options such as online classes, classes in the evenings, and classes with pre- recorded lectures. This can make them a feasible option for students who work during the day. Students should remember, however, that there are other flexible educational programs out there. Many community colleges offer classes at night, and the Google Certificate Program operates on an entirely flexible schedule which you can complete on your own time.
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Most for-profit colleges offer trade-oriented programs. They are designed to prepare students for a specialized skill in the workforce. This helps them improve their marketability by showing tangible financial outcomes. Students looking for professional training will find this attractive.
You should note, however, that there are many other programs out there which provide trade-oriented education. Trade school, certificate programs, and apprenticeships are just a few examples. And the added benefit of an apprenticeship is that you get paid to receive your education!
Less expensive than other four-year degrees
For-profit colleges often seem enticing because of their low cost. The College Board’s 2021 report on college pricing found them to cost around $15,780 per year in tuition. Meanwhile, many other schools charge upwards of $40,000 per semester. That being said, for-profit colleges charge a comparable fee to community colleges.
Remember as you make your college choice to consider return-on-investment rather than focusing on only price. It might be worthwhile to pay more money for a more reputable degree than to pay less for a degree that will not tread water. What’s more, consider that not-for-profit schools typically give out more generous scholarships than for-profit schools. Because they are more concerned with providing education than making profit, they will extend money to students they find promising, whereas for-profit schools are looking for full-tuition students.
Low graduation rates
For-profit schools have notoriously low graduation rates. A 2019 report found the 6-year graduation rate for for-profit bachelor’s programs to be 26%. In contrast, not-for-profit schools had a 6-year graduation rate of 63%.
Low graduation rates indicate dissatisfaction with the educational institution and infeasibility of a degree. Students should look at this statistic as a marker of whether a school does a good job in serving its student population.
Private schools vs. For-profit schools
At this point, you might be thinking, what’s the difference between private schools and for-profit schools? It’s a subtle but very important distinction. Let’s break it down:
- There are two major classifications to be made between schools: Public vs. private and not-for-profit vs. for-profit
- All public schools are not-for-profit. Some private schools are not-for-profit and others are for-profit
- If a school is private, that only means that it is not owned and operated by the government. However, it is possible for a private organization to operate on a not-for-profit structure. They do not have stockholders and they do not pay out their earnings, but rather reinvest them in their education
You may remember the old mathematics trick – All squares are rectangles, but not all rectangles are squares. You can apply that here – All for-profit schools are private, but not all private schools are for-profit. Private not-for-profit colleges operate on a similar model to public not-for-profits.
List of well-known for-profit colleges
Many for-profit colleges use deceiving names to cause confusion with more reputable, not-for-profit institutions. Here is a list of some of the most popular for-profit colleges:
- Strayer University
- Monroe College
- DeVry University
- Capella University
- Berkeley College
- American National University
- The College of Westchester
- University of the Potomac
- The Los Angeles Film School
- University of Phoenix
- Walden University
- American Public University System
- Grand Canyon University
We’ll be the first to admit, we have not been kind to for-profit colleges in this article! The fundamental model of the for-profit college creates a situation that breeds exploitation of students and low-quality education. But that is not to say that no-one has good experiences at for-profit colleges. If the low admission requirements, flexible schedule, and low cost suit your situation, you might find a good fit at a for-profit school.
We only suggest that you approach for-profit colleges with a critical eye. Remember that they operate in a system that often encourages low-quality education for students. Ask the right questions and make sure to check their graduation rate and expenditure on students. A great first step is to find out whether the school is accredited. Good luck in your college decision!
Also see: How to choose a college
Frequently asked questions about for-profit colleges
Are for-profit colleges a scam?
Many for-profit scholarships have yielded negative outcomes for their students while providing profits for their executives and founders. However, not all for-profit colleges are a scam. Be cautious when considering a for-profit college. Talk to current students and alumni and investigate their expenditure to see if you’ll get a good education.
How can I find out if my school is for-profit?
It should be relatively simple to find out whether any given school is for-profit. It is usually one of the first factors listed on any third-party college database. You can also find the information on Wikipedia and any encyclopedia.
It’s best to look towards a third-party resource for this information. Because of the questionable reputation of for-profit schools, some schools make it hard to find this information on their official website.
Are for-profit colleges accredited?
Some for-profit colleges are accredited, and others are not. It is more common for non-profit schools to lack accreditation than it is for not-for-profit schools. Make sure to clarify this information before agreeing to attend any school. Accreditation is an important benchmark that indicates how your college experience will be and how future employers will value your degree.
Can I use federal student loans at for-profit colleges?
You can use federal student loans such as Stafford Loans and Parent PLUS loans at accredited for-profit colleges. However, you may not be able to take out as much in loans as you would at a not-for-profit school. Complete the FAFSA and reach out to your potential school’s financial aid department to find out how much you would be eligible for.
Are for-profit colleges worth it?
For-profit colleges are worth it for some students due to their low cost, flexibility in scheduling, trade-oriented education, and low admission requirements. However, they typically have less reliable student services and educational programs than not-for-profit schools. Students should be cautious about choosing a for-profit college.
Can I use the Pell Grant at for-profit colleges?
You can use the Pell Grant at accredited for-profit colleges. However, legislation in late 2021 might mandate a lower Pell Grant award limit at for-profit colleges than at not-for-profits. Complete the FAFSA and reach out to your potential school’s financial aid department to find out how much you would be eligible for.