For-profit or non-profit… that’s a dilemma every potential college student must consider. The higher education market has exploded with private colleges in recent years, and the challenges brought by the pandemic have made them more attractive to wealthy families. Many for-profit schools, such as Capella University and DeVry University, are popularly advertised, contributing to their growing popularity.
Of course, there are negative perceptions about private schools, such as their high cost of attendance and entitled culture. But their popularity remains because of the higher economic gains that their graduates enjoy!
In a Georgetown Center on Education and the Workforce (CEW) report titled “A First Try at ROI: Ranking 4,500 Colleges”, graduates of private for-profit and non-profit colleges earned $551,000 and $838,000, respectively. While graduates of prestigious public colleges and universities earned $765,000 in comparison, it cannot be overemphasized that the prestige coupled with the quality instruction in many private colleges make them attractive.
But there are also many differences between for-profit and non-profit tertiary schools. In this article, we’ll delve into the heated debate about which of these two types of private institutions is a better investment.
What Are The Differences in For-Profit or Non-Profit?
Let’s first take a look at their fundamental differences since these have an impact on their pros and cons.
For-profit schools are educational institutions operated as businesses and, thus, with the expectations of turning a profit (i.e., higher revenues over costs). Their revenues typically come from tuition, fees, and other charges, including room and board for in-residence students.
Their main goal, albeit not stated on their publicly-shared vision and mission, is earning profit and passing it on to their shareholders and investors. Their ability to create a positive return on investment allows them to stay in business. Their spending patterns reveal significant investments in marketing and advertisements to attract more students, shareholders, and investors.
For-profit schools are often large schools with numerous locations across the state or country. Most offer a wide range of two-year and four-year degree programs from the undergraduate to post-graduate levels. The programs may be offered on-campus, online, and/or a combination of both.
Surprisingly, for-profit schools are largely funded by federal financial aid! But their financial aid may be limited to loans, although federal scholarships and grants may be available.
Examples of for-profit schools include:
- Academy of Art University
- Capella University
- Fashion Institute of Design & Merchandising
- McCann School of Business and Technology
- Colorado Technical University
Non-profit schools are also partly funded by federal funds paid for by taxpayers. But it has a major difference from for-profit schools: Their revenues from tuition and fees must be reinvested back into their institution. The reinvestment takes many forms, such as improvements in operations, increased instructor salaries, and student services development.
Their main goal isn’t earning a profit year in and year out but fulfilling their educational mission. Their focus is on the improvement of quality of instruction for its students and graduate outcomes.
Besides receiving direct public funds and private endowments, non-profit universities are also exempted from federal corporate income taxes. For this reason, their tuition fees are typically lower, and their financial aid options are better. There are exceptions, so we suggest carefully looking at the sticker prices.
Examples of non-profit private schools include:
- Harvard University
- Princeton University
- Yale University
- Stanford University
- Brown University
- Massachusetts Institute of Technology
- Columbia University
- California Institute of Technology
- Duke University
- University of Pennsylvania
Which Has the Highest Tuition?
We look at the tuition fees first because these are the most crucial aspects that prospective students and their families look into. While many private schools have been making considerable cutbacks in their sticker prices, the fairly expensive tuition can turn off students from enrollment.
For-profit schools have sticker prices that fall between non-profit and public schools, on average. The average tuition at non-profit colleges in 2018-2019 was $17,500. But it’s lower than the $35,830 at private non-profit schools while also being higher than the $10,230 tuition at public schools.
But that’s not exactly the complete picture! While non-profit schools have higher tuition fees, their students pay far less for their education.
This is because these schools have lower out-of-pocket costs due to their wide range of financial aid options. Their students rarely pay the full price of the tuition and other published fees.
In the College Board Trends in Pricing 2018 Report, 66% of students in non-profit schools pay less than $20,000 in yearly tuition. In contrast, only 31% of students do so in for-profit institutions.
The bottom line: You may get more financial aid and, thus, pay lower tuition at non-profit schools while getting exceptional education with high returns on investment.
But you must also be careful about looking into other aspects of your college education. Tuition should be considered in light of the quality of instruction, positive college experience, and networking opportunities.
What Are the Upsides and Downsides of Enrolling in Non-profit Colleges?
- Lower cost of attendance when public funding and financial aid are factored in
- Higher quality of instruction due to reinvestments in the quality of instructors, curricula, and facility
- Greater focus on the improvement of student experiences and success, thanks to less focus on revenue generation
- Greater level of academic independence due to their independent ownership structure
- A more selective admission process can deter prospective students (But it’s also one of the factors that attract the best and the brightest)
- Less flexible learning options (i.e., online and hybrid programs)
What are the Upsides and Downsides of Attending For-profit Colleges?
- Less selective admissions policy makes it easier to enroll
- More diversity in the student population, particularly in terms of black, female, and older students. Many schools also enroll more single parents, low-income individuals, and working adults.
- More flexible learning options with partially or fully online programs offered. Schools are also more likely to offer more technical-vocational degrees.
- Accreditation issues are more frequent and, thus, graduate outcomes may not be as desirable (i.e., employers don’t recognize the diploma)
- Transfer of credits may be problematic partly because of accreditation issues. According to a 2017 Government Accountability Standards Report, students lost 94% of their credits when transferring from for-profit to public colleges.
- Higher student debt and default rates can haunt graduates for several years
- Greater risk for school closures that can leave students with an education and debt but no degree
But don’t dismiss for-profit colleges that easily either! You may find that these institutions may be a good fit for you if:
- Your standardized test scores are average of low;
- You’re looking for a specific certification or vocational training;
- You’re looking for an online program.
Just be sure to do your research about the pros and cons before making your decision.
What Are the Steps You Can Make to Pick the Best University for You?
There isn’t one right answer to whether for-profit or non-profit colleges are superior. It’s a matter of personal preference. Consider the above pros and cons to determine which college type best fits your learning needs. Don’t be dissuaded from for-profit universities solely because of bad press, and don’t simply pick a non-profit college because it’s “traditional.”
Conduct your research to make a well-informed, individualized decision. Always make sure your for-profit or non-profit college choices are regionally accredited. Double-check their accreditation status with the U.S. Department of Education to guarantee credit transfer, financial aid, and high academic standards. Selecting the right college ensures your 4+ years will establish a direct pathway to career success and satisfaction.
Are you ready to earn a Bachelor’s degree? Need more details? Check this out: WHAT IS A BACHELOR’S DEGREE?
Be aware of online scams… Don’t forget to check this out first: HOW TO AVOID ONLINE EDUCATION SCAMS