What Is a For-Profit College?

In the last decade, for-profit colleges have come under intense scrutiny for their high costs and poor educational outcomes.

Despite attempts to entice nontraditional students with their flexible hours and fast-track programs, these schools don’t give students better value. For the 2017-18 academic year, for-profit colleges cost students nearly $8,500 more than public colleges.

Below, we look at the differences between for-profit schools and nonprofit schools and explore the reasons why most students actively avoid for-profits.

Privately owned and operated, for-profit colleges leave decisions up to investors, not educators. Unlike traditional nonprofit schools, for-profits aim to make money — though they’re often the least successful at helping their students establish lucrative careers.

For-profit colleges also cost more and offer degrees that are typically worth less than those earned from nonprofit institutions. A 2014 study found that employers generally looked down on applicants who held degrees from for-profit schools.

What’s more, unemployment rates are higher among for-profit alumni. Unable to find work in their fields, graduates of for-profit colleges carry a disproportionately large chunk of the U.S. student debt.

By contrast, nonprofit schools, which can be either public or private, are managed by a board of directors or trustees. Public nonprofits are funded by state governments, whereas private nonprofit colleges are funded privately through a combination of tuition, donations, and endowments.

All traditional colleges — including small liberal arts colleges and large state universities — are nonprofit. Nonprofit schools still make money from tuition and donations, but those profits all go toward running the college rather than paying shareholders.

Compared with nonprofits, for-profit colleges leave a much larger number of students in debt. Even worse, they produce a disproportionate share of indebted dropouts.

Graduation rates aren’t much better. According to the National Center for Education Statistics, just 1 in 5 for-profit college students graduates within six years. That’s 40 percentage points less than the average graduation rate (60.4%) for all bachelor’s degree-seekers.

Despite charging thousands of dollars more per year in tuition than public colleges, for-profit schools typically target underprivileged students. Data shows that for-profit college students are more likely to be older, Black, and female; they’re also less likely to have graduated from high school.

Tactics used to lure underprivileged students inarguably involve a level of deceit. Unaware that two- and four-year public institutions are cheaper — and swayed by spurious promises about career opportunities — many prospective students are pushed to sign loans to attend costly for-profit programs without considering other educational options.

Recently, the University of Phoenix — a well-known for-profit school system — came under fire for misleading prospective students into thinking it maintained relationships with big-name companies like Microsoft, Twitter, and AT&T. The school was ordered to pay a $50 million fine and cancel $141 million in debts owed by students who’d been harmed by the deceptive ads.

Indeed, few of the advertising pitches and aggressive recruiting tactics used by for-profit schools have basis in fact. The reality is that for-profit colleges graduate only a small percentage of their students, leaving a substantial proportion of both graduates and dropouts deep in debt.

The Obama administration was the first to release loan data showing how for-profit colleges hurt students. The Department of Education continues to publish this data, despite the Trump administration’s decision to quietly ease regulations designed to protect for-profit students.

Government scrutiny of for-profit colleges has waxed and waned, but recent Democratic task force recommendations vow to protect students from “low-performing” for-profit programs and forgive the debt carried by those “who were ripped off by predatory schools.”

Senator Bernie Sanders and Democratic presidential nominee Joe Biden claim that “Democrats will crack down on predatory for-profit higher education programs.” Biden also promises to remain proactive in his fight against for-profits should he become president.

Over the past decade, nearly 40% of for-profit schools have shuttered, including key players like ITT Technical Institute and Corinthian Colleges. But with the coronavirus pandemic pushing students online, for-profit colleges are now grasping at new opportunities to increase enrollment.

Most for-profits offer flexible programs in high-demand vocations that could attract both workers who’ve lost their jobs and college students whose campuses have closed.

Despite their career promises and tuition discounts, for-profit schools should be a last resort. By and large, the for-profit industry fails to benefit students, who rarely graduate and often find themselves steeped in debt.

Not only do degrees from for-profit institutions carry little weight on the job market, but the credits themselves are also unlikely to transfer to nonprofit schools. Research indicates that an average of 94% of for-profit credits fail to transfer to public colleges and universities.

Those interested in flexible, remote learning should instead consider enrolling in an accredited online college.

Feature Image: Jorge Villalba / iStock Unreleased / Getty Images