What Is a For-Profit College?

for-profit college is a school whose primary goal is to maximize profits.

Definition and Example of a For-Profit College

A for-profit college is an academic institution that runs like a business and anticipates making a profit by bringing in more money than it spends. One of the main business goals is to increase that profit and distribute it to owners and shareholders who have invested in the institution.

  • Alternate name: Proprietary institution

Large, national chains that are privately held (or publicly traded) and provide a variety of two- or four-year degree programs, either entirely on campus or partially or entirely online, are typical of these institutions. These include professional certificate programs in subjects like communication and theology, as well as bachelor’s, master’s, and doctorate degrees in a variety of professions like healthcare and the creative arts. Nontraditional students who want to get a degree or a professional certification occasionally look at for-profit universities.

How a For-Profit College Works

Federal financial aid provided by tax dollars provides the majority of funding for for-profit universities.

Additionally, they charge tuition, a sizeable amount of which is used for non-educational expenses like paying investors or for marketing, sales, and advertising. Additionally, government grants and scholarships might be offered, although financial aid at these institutions is occasionally only available in the form of loans. Government, endowments, and tuition are the main sources of funding for public and nonprofit private colleges. However, the majority of this money is reinvested in the institutions (for example, in teacher salaries and student services), and there are typically more non-loan financial aid options available.

For example, Strayer University which is a private, for-profit school with branches throughout the country and accreditation from the Middle States Commission on Higher Education, is recognized by both the U.S. Department of Education and the Council for Higher Education Accreditation. It offers a combination of online and in-person associates, bachelor’s, and master’s degrees along with certificates. It participates in a number of federal funding programs, making students eligible for federal student loans or grants, but private loans are also an option.

How Much Do For-Profit Colleges Cost?

The cost of for-profit institutions is higher than that of public colleges but lower than that of private nonprofit colleges.

The median annual costs for attending various kinds of universities that award post-secondary degrees are listed below.

College type Median tuition and required fees (2019–2020) Median tuition, fees, room and board (2019–2020)
For-profit colleges $13,515 $26,394
Public colleges $7,266 $20,992
Private nonprofit colleges $36,300 $52,749

Pros and Cons of For-Profit Colleges

Pros Explained

The benefits of for-profit universities include:

  • Less selective: Beyond the requirement for a high school diploma, for-profit universities typically have open admissions processes, making admittance there much simpler.
  • More diverse in certain respects: greater diversity in some ways The majority of the students at for-profit universities are older, Black, and female. Additionally, they frequently enroll more low-income people and parents with children.
  • Options for flexible programs: For-profit colleges offer many degrees partially or entirely online because they cater to atypical students like people who want to earn a degree while working or raising children. Additionally, there are more vocational degrees accessible in disciplines like cosmetology and medical coding.

Cons Explained

The negative aspects of for-profit universities include:

  • Accreditation problems: A for-profit college’s colorful marketing brochures may promise to put you on the path to a successful profession, but this promise isn’t always kept. Accreditation issues For-profit colleges offer a wide range of programs and credentials, some of which are more reputable and well-recognized than others. If you’re not careful, you can subsequently discover that potential employers don’t recognize your degree or certificate.
  • Poor credit transferability: Students frequently discover that few of their credits transfer or are accepted by other universities, even when they enroll in accredited programs. According to a 2017 Government Accountability Office (GAO) audit, students who transferred from for-profit universities to public colleges lost approximately 94% of their credits.
    Higher debt and default rates: Students enrolling at four-year, for-profit colleges are also more likely to take out loans, in part because they’re the only option at some schools.
  • Higher debt and default rates: Over 65% of students at for-profit colleges were awarded loans in the 2018–2019 school year, compared to only 35% at public institutions and 59% at private nonprofit schools. Bachelor’s degree holders from private for-profit colleges took on an average of $8,185 in debt in 2018–2019, as opposed to an average of $7,011 from public institutions during the same year. The percentage of students who default on their student loans is considerably greater at for-profit colleges: 15.6%, as opposed to 10.8% at public universities and 7.1% at private nonprofits.
  • Lower graduation rates: decreasing graduation rates In terms of important results, including college graduation rates, for-profit institutions typically fall short of public and private colleges. In contrast to 62% at public universities and 68% at private nonprofit schools, the graduation rate for students enrolled in a four-year degree at a private, for-profit college for the six-year period ending in 2019 was only 26%.
  • Potential for school closure: Possibility of a school closure The past few years, some for-profit colleges have closed, leaving current students with debt but no degree. For example, Vatterott College closed campuses across the U.S. in December 2018, and the company that owned Argosy University and some art institutes shut down in March 2019.

Is For-Profit College Worth It?

Increased education is valuable, however, if, at all possible, it makes more sense to attend a public school or private nonprofit institution due to the drawbacks of for-profit colleges, such as accreditation issues and higher debt.

A proprietary institution can nevertheless assist you further your education if you are a nontraditional student who would profit from the open admittance or flexibility of a for-profit college.

To decide whether an application to a proprietary institution is worthwhile, take into account the following factors:

  • Recognized accreditation: A for-profit institution should have accreditation from a recognized accrediting body, which is one that has been examined by the Council for Higher Education Accreditation or the U.S. Department of Education.
  • Affordability: Ensure that tuition and other costs are within your means. Explore non-loan sources of financial aid, such as grants or scholarships. If only loans are available, borrow only as much as you need, to keep your debt low.
  • Alignment with educational goals: Check that the for-profit college offers the program you’re interested in and that it meets standards for professional licensing. If you hope to transfer to another college, reach out to that school to see which credits (if any) it would accept from the for-profit school of interest.

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