What Is a For-Profit College?

For-profit colleges focus on paying back ownership and shareholders, which means students end up paying more for their education compared to other types of schools.

Written by Dori Zinn / October 10, 2022

Quick Bites

  • 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.[1] This is different from nonprofit colleges and universities, where money goes back into the college, campus and other institutional needs.

“Very simply, for-profit colleges are similar to privately held businesses,” says Natalia M. Zimnoch, a registered investment advisor with LifeMark Securities. “Most colleges are for-profit universities.”

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.

Inside this article

  1. How for-profit colleges work
  2. For-profit college example
  3. Legal trouble at for-profits
  4. For-profit vs. nonprofit
  5. Whether to attend a for-profit

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.[2]

“The benefits of for-profit colleges are mostly for the professors, shareholders, investors and owners [due to] higher profits,” Zimnoch says. 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 example

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 (Lake Mary, FL)

  • 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.[3]

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.

What’s the Average College Tuition in the U.S.?

What’s the Average College Tuition in the U.S.?

Here are the costs for public and private colleges, and advice for how to pay for it all.

Find out more

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.[5]

  • 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.

Alert

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.

How to Pay for College

How to Pay for College

Fortunately, there are many resources available to help pay for college, including gift aid, student employment and student loans.

Find out more
Article Sources
  1. “Non-Profit vs. For-Profit Colleges: What You Need to Know,” Franklin University, https://www.franklin.edu/blog/non-profit-vs-for-profit-colleges-what-you-need-to-know.
  2. “TCF Estimates ‘Bang for Tuition Buck’ at More than 5,000 Colleges Nationwide,” The Century Foundation, Feb. 28, 2019, https://tcf.org/content/about-tcf/tcf-estimates-bang-tuition-buck-5000-colleges-nationwide/.
  3. “Are There Any Good For-Profit Colleges? Top 8 For-Profit Colleges,” PrepScholar, Oct. 14, 2021, https://blog.prepscholar.com/best-for-profit-colleges.
  4. “Education Department approves $3.9 billion group discharge for 208,000 borrowers who attended ITT Technical Institute,” U.S. Department of Education, Aug. 16, 2022, https://www.ed.gov/news/press-releases/education-department-approves-39-billion-group-discharge-208000-borrowers-who-attended-itt-technical-institute.
  5. “Largest Nonprofit Online Universities,” Nonprofit Colleges Online, https://www.nonprofitcollegesonline.com/largest-non-profit-online-universities/.

About the Author

Dori Zinn

Dori Zinn

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.

Full bio

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