difference between for-profit and non-profit colleges

Non-Profit Vs. For-Profit Colleges: What You Need To Know

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If you are trying to choose a college, you are probably overwhelmed with all the different criteria that you need to take into consideration to make the best choice. Depending on your goals, you could be evaluating things like location, programs offered, or cost.

One area that you might not have thought about or even heard about, is whether the college is classified as non-profit or for-profit. Alternatively, if you have heard about this classification before, you may have heard horror stories about how awful for-profit colleges can be. This could have made you completely reconsider a school, just because they are for-profit.

There is no reason to consider a school as bad simply because they are for-profit. However, it is important to understand the difference between non-profit and for-profit colleges, understand why a college is given that distinction, and how it can possibly affect you.  

What is a for-profit college?

for-profit college

 When a college is categorized as for-profit, it means they are a corporation with stakeholders. The school is a business and the product is education. The stakeholders can profit off of the success of the school and are the driving force behind many decisions. The company has a CEO who executes those decisions and makes sure that the college stays on track for success.

It is important that for-profit institutions continue to grow and gain market shares. The college does not receive government funding so any investment in the school has to come through stakeholder approval. A failing college would mean a decrease in profits for the stakeholders and it could cause the college to go out of business. 

You may often see career-focused or trade schools as being for-profit. Examples of this would be paralegal programs, medical assisting, or AC repair. However, there are no specific characteristics that make a college for-profit.

There are for-profit colleges that offer full associate, bachelor, and master’s degrees. For-profit colleges might only offer courses online, but there are some that offer in-person classes. Also, as online courses become more popular most institutions will offer full programs online regardless of whether they are for-profit or non-profit. 

What is a non-profit college?

A non-profit college does not have stakeholders or a CEO. Non-profit schools are organizations that are run by a Board of Trustees and an appointed campus president. A common misconception is that only public schools are non-profit, which is incorrect. While a common example of non-profit colleges are public state schools; private and religious colleges can also be non-profit.

For instance, Harvard, Yale, Notre Dame, and Brigham Young University are all non-profit schools. In terms of funding, nonprofits can receive funding from many different sources. Many schools receive government funding for research and science purposes, as well as receiving money from endowments.

Endowments are donations from alumni or other people who want to support the school. This can be a huge benefit to the college since the funds are not taxed and the endowment can continue to grow. Schools like Harvard have endowments that are worth billions of dollars. However, there are not many colleges in the US that have sizable endowments. 

Receiving Federal Financial Aid

Students at both for-profit and non-profit schools can be eligible to receive financial aid. You should not assume that any school would be disqualified for financial aid simply because of their for or non-profit status. The more important detail to consider is whether the school is accredited and if they offer degree-based programs.

Accreditation means that a school was certified by an external group or organization and it ensures that the programs offered are valid. This is important to check for, not only because of financial aid, but receiving credits from an unaccredited school can make them difficult to transfer to other instructions.

A degree from an unaccredited school can also be worthless to employers or could even prevent you from being able to become certified in certain fields that require additional certification, such as nursing or teaching. It can be more common for for-profit schools to be unaccredited, since non-profit schools receive funding from the government and therefore are more highly regulated.

However, both for-profit and non-profit schools can be unaccredited. So, make sure you are checking the accreditation status before signing up. 

Another issue you can run into is if you are attending a program that is non-degree seeking, this can prevent you from being eligible for federal financial aid. Most non-profit programs are degree-seeking so it is usually not an issue if your school is non-profit.

If you are planning on attending a for-profit school, make sure that your program will lead to a degree and not just a certificate or a diploma. There is nothing wrong with pursuing a certificate or license, especially if you need it for career advancement. You would just need to fund it through private loans or out of pocket since federal financial aid likely will not cover it. 

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Traditional vs Non-traditional Students

Students who are leaving high school and entering directly into college full-time are typically considered traditional students. These students are usually dependent on their parents for assistance while in college, they live on campus, and going to school is their main focus.

Non-traditional students are students who had delayed entry into college, are attending part-time, are financially independent, live off-campus, and could be married or have dependents. In the past, non-profit schools catered to traditional students and for-profit schools catered to non-traditional students. For a traditional student, this meant that the school focused on campus-based activities and in-person learning.

Since many non-profit schools are state universities or 4-year colleges, campus life is often emphasized and there is a lot of investment in sports and campus spirit. For-profit schools are typically more focused on a “no-nonsense” approach to learning. Class times are usually in the evenings or on weekends so that students can fit classes in with their other priorities.

This separation is becoming less of a standard as online classes become more popular. Many non-profit schools offer full degree programs online and are trying to accommodate non-traditional students.

There are also many traditional students who are looking for ways to speed up the degree process so for-profit schools, which often offer accelerated programs, have shifted their focus as well. In general though, if you are looking for a school that offers traditional campus life with dorm rooms and Greek Life, you will likely end up at a non-profit school. 

Tips for Avoiding College Scams

Diploma mills and other schools that give out degrees without requiring much or any work from the student put a blemish on the education industry. These “schools” are only interested in making a profit and don’t care that the degrees that they are handing out are essentially worthless.

There have been for-profit schools that have run into issues with the federal government because of shady admissions practices, exploiting federal financial aid, and low graduation/job placement rates. However, there is nothing inherently bad about a for-profit school. It depends on the school itself and how they conduct their business.

If you are unsure if a school is a good match or are worried about attending a college that is not legitimate, consider the areas below before signing up. 

how to avoid college scams, signs of a college scam

Accreditation

This is huge and something that you should look up for any school that you are considering attending. Make sure that the school is accredited and that they haven’t had any recent lapses in accreditation. Even if a school has accreditation when you start, but loses it while you are attending, it can affect the validity of your credits received.

A great way to determine if a school has had any issues with accreditation is to visit the Database of Accredited Postsecondary Institutions and Programs (DAPIP). This site is hosted by the US Department of Education and it is a free and easy resource for students who are interested in researching a school.

Accreditation Type

Another important factor, even if a school is accredited, is the accreditation type. There are two main forms of accreditation, regional and national. As their names suggest, regional accrediting agencies only work to apply accreditation to schools in certain regions. Typically regional accreditors are concerned with non-profit and traditional schools.

National accreditors are able to assess accreditations across the entire nation. National accreditation is typically reserved for vocational and for-profit schools. The only time accreditation type becomes an issue, is if you are planning on transferring from one school to another.

It can be difficult to transfer credits from a nationally accredited school into a regionally accredited school so review the policy handbook for any prospective schools before starting.  

Graduation Rates

Once you have determined the accreditation information for schools that you are considering, take a look at their graduation rates. This number will show you the amount of students that reach graduation and in how many years. You can usually find statistics for graduation rates for the entire college and per program.

However, if the program is new the school does not have to report graduation rates until the program is old enough to have graduates. If the program that you are considering is new, keep in mind that you might have to use the college-wide statistics or look at a similar program to have an idea of what the graduation rates will be.

Student Reviews

It might seem obvious to check student reviews before choosing a school, but if you have never considered checking the reviews it is definitely a good place to start. Reviews allow you to gain an understanding of how current and previous students feel about the school. You can also look for consistent trends. For instance, if a lot of reviews are mentioning issues with instructors or financial aid processing, that can be an indicator of an institution wide concern.

You should consider these issues before agreeing to attend that school. However, keep in mind, that reviews can be subjective and each person’s situation is different. Do your research, but don’t assume that every bad thing you read about a school is true or will reflect your future experiences. 

College Net Price Calculator

college net price calculation

Any school that participates in the federal financial aid program (which can be both for-profit and non-profit schools) is required to provide prospective students with a net price calculator (NPC). An NPC is a breakdown of the tuition and fees associated with your program.

The net price calculator should allow you to estimate the cost, based on the number of classes you will be taking and any estimated funding that you will receive. While the NPC is only an estimate it is a great tool to begin comparing costs if you are considering multiple schools. 

Transparency

Schools should have all of the information discussed so far readily available. You should not have to dig to find it and they definitely should not be reluctant to provide it. If you ask for any of the information and the school gives you the runaround, consider that a huge red flag. Your education is an investment of your time and money.

If the school you are working with does not value transparency, be aware that they might be a scam. Even if they are not a scam it should be a cause for concern that they are not being open and honest about what they offer.

Wrap-Up

At the end of the day deciding which type of college to go to can be difficult. Whether you choose for-profit or non-profit, there are many different options and no school is going to be perfect for everyone. It is important to understand the different distinctions for each school and to do your homework.

Starting an education journey is exciting and it is easy to allow that excitement to cloud your decision-making skills. However, take your time and thoroughly review all of the items listed in this article before choosing a school. If you do that, you will know you made a solid choice, whether the school is non-profit or for-profit.

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