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Key points 

  • Even though for-profit and nonprofit colleges work in similar ways, the way they earn and spend money are vastly different.
  • For-profit colleges focus on revenue and earnings from tuition because those funds go back to owners and shareholders.
  • Nonprofit and public universities put revenue back into instruction, focusing on the students.
  • For-profit schools might not be accredited institutions, hurting your chances of qualifying for federal financial aid.

Not all colleges and universities are alike. Some are public and some are private. Some are nonprofit and some are for-profit. These differences can have important effects.

A for-profit college puts tuition revenue into people — splitting earnings among owners, investors and shareholders at the institution — rather than back into the school. This is different from nonprofit colleges and universities, where money goes back into the college, campus and other institutional needs.

Making money is the top priority of for-profit colleges. So keep this in mind as you’re exploring all types of colleges and universities for your education.

How does a for-profit college work?

In most cases, a for-profit college works in much the same way as a public university and non-profit school. They provide a college education and sometimes are known for specific majors and concentrations.

But it’s how they earn and spend their money that sets them apart. Since for-profit colleges focus on earning revenue and not reinvesting earnings back into the school, they tend to pass that cost onto the students.

For-profit colleges spend the least on instruction. A report from The Century Foundation found that for-profit colleges spend less than half of tuition revenue on instruction, even though they charge more. They spend the least on instructional spending compared to public universities and non-profit colleges.

“The benefits of for-profit colleges are mostly for the professors, shareholders, investors and owners [due to] higher profits,” says Natalia M. Zimnoch, a registered investment advisor with LifeMark Securities. Just because you pay more for a specific college doesn’t mean you’ll necessarily get a better education compared to public and non-profit universities.

For-profit college examples

Most for-profit colleges specialize in a specific niche, like technology, culinary or fashion, though they might offer other concentrations. Some for-profit colleges and universities include:

  • DigiPen Institute of Technology (Redmond, WA)
  • ECPI University (Virginia Beach, VA)
  • Fashion Institute of Design & Merchandising (Los Angeles)
  • LIM College (New York)
  • Monroe College (New York)
  • Stanbridge University (Irvine, CA)
  • Strayer University (Washington D.C.)
  • West Coast University: Los Angeles (Los Angeles)

While these aren’t the only for-profit colleges and universities, these are some of the best ones in the country.

Cost of attendance varies widely. For instance, at the Fashion Institute of Design & Merchandising, it costs more than $41,000 a year to attend. However, it’s less than $12,000 a year at Monroe College.

Legal trouble at for-profit institutions

Eligibility requirements and costs vary widely not only between nonprofit and for-profit, but also between many for-profit schools. Many for-profit institutions around the country have shut down without any warning to students, faculty and staff. These closures often leave students with thousands of dollars in student loan debt.

In some cases, the government has forgiven loans to those who attend for-profit schools using federal student loans. In August 2022, the Department of Education announced it would discharge almost $4 billion in student loan debt for those who attended ITT Technical Institute after the school was found guilty of defrauding students.

But that’s not the case for every student at every for-profit school. Many for-profit schools have been found guilty of fraud and misleading practices. And while they might end up paying the government for those wrongdoings, many students are left paying student loan debt for schools that no longer exist.

For-profit vs. nonprofit vs. public: What’s the difference?

While for-profit schools focus most on how to maximize their earnings through tuition costs. You can spot the difference in a few ways, including:

  • Tuition costs: Most for-profit colleges cost significantly more than public universities. The more money a for-profit school charges in tuition, the more they can pass on in earnings to owners, investors and shareholders. Most public universities and nonprofits cost significantly less than for-profit ones. Miami-Dade College in Miami, Fla, is less than $2,900 a year in tuition costs—a major drop from the five-figure price tag for-profit schools mentioned above.
  • Financial aid: Not all for-profit schools are considered accredited institutions. This means they might not accept federal financial aid from students to pay for school, meaning families are on the hook for the sticker price. At nonprofit and public universities, you can complete the FAFSA and qualify for financial aid at the federal, state, local and institutional level based on your need. So, you’re not required to pay the full amount listed. Nearly one-third of students at for-profit schools pay less than $20,000 a year in net tuition costs, compared to two-thirds at private nonprofit schools.
  • Average graduation rate: Students at public and nonprofit schools spend less time getting degrees and certifications compared to those at for-profit colleges. It takes for-profit college students almost six years to complete their degrees. It’s 4.8 years at private nonprofits and 5.2 years at public universities.

Note: While you might get into a non-accredited school, you’re subjected to using private student loans, which don’t have the same federal protections and usually have higher interest rates and fees than federal student loans.

Should you try a for-profit college?

You might want to consider a for-profit college if:

  • You can afford it: If you can pay for the higher out-of-pocket costs or you don’t mind taking out student loans to cover the costs, then a for-profit college might work for you.
  • It offers the best education for your interests: Many for-profit colleges offer great educations in certain fields.

But you might want to skip for-profit colleges if:

  • You don’t want to take on more debt: If your school doesn’t accept federal financial aid and you don’t have the cash on hand to pay for your new expensive school, you’re faced with taking out private student loans to cover those costs. Keep in mind your future career and if you’ll be able to repay your loans on that potential salary.
  • You haven’t done the research: Remember that for-profit colleges are focused on earning enough to maximize payments to owners and stakeholders—not reinvesting that money in education. Make sure you’re choosing a school that you’ve heavily researched, not necessarily the first one to accept you as a student.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Dori Zinn

BLUEPRINT

Dori has covered personal finance for more than a decade. Her work has appeared in the New York Times, Forbes, CNET, TIME, Yahoo, and others. She loves helping people learn about money, and gravitates toward topics that give people the tools they need to financially succeed. She likes writing about budgeting, college affordability, jobs and careers, and the mental and emotional impact of money.