Nonprofit vs. For-Profit Colleges: What’s the Difference?

• For-profit colleges distribute profits to owners. Nonprofit colleges reinvest profits.
• While some nonprofit colleges have low tuition rates, others can be quite expensive.
• Among private universities, for-profits charge less tuition on average than nonprofits.
• All public colleges and universities are nonprofit schools.

What's the difference between for-profit and nonprofit colleges? For-profit colleges distribute their profits among the institution's owners, investors, and shareholders. In contrast, nonprofit colleges reinvest their profits back into the institution.

Public universities, which are nonprofit institutions, tend to have lower average tuition rates than private universities. However, among private universities, for-profit schools charge less tuition on average than nonprofit universities. Online schools can operate as either nonprofit or for-profit institutions.

In this guide, we'll take a closer look at nonprofit and for-profit colleges. You can also learn about the potential pros and cons of for-profit colleges vs. nonprofit colleges.

What Is a Nonprofit College?

Nonprofit colleges and universities receive funding from tuition and fees, endowments, and the government.

Since they are not allowed to distribute profits to individuals, they invest most of this money into improving their students' educational experience. Nonprofit colleges may use their funds to improve the curriculum, hire more teachers, or provide student services.

Nonprofit colleges often offer a variety of degree programs, including traditional on-campus programs and online programs. They offer programs in many subject areas.

If you're not sure if the school you're considering is nonprofit, you may be able to find that information on the school's "About Us" webpage or by calling its administrative offices.

What Is a For-Profit College?

For-profit colleges and universities report to owners, investors, or shareholders and distribute the school's profits among them.

Typically, the college president reports to the school's board of directors. The board determines how to run the school. The president makes the day-to-day decisions.

The tuition collected by for-profit colleges is used for marketing and recruitment. It's also used to cover operating expenses, such as teacher salaries and the cost of heating and cooling buildings on the school's campus.

What's the Difference Between a Nonprofit College and For-Profit College?

For-profit colleges tend to have less stringent admission processes. So they may be a good option for some students. If college entrance scores are required, the minimum requirements may be lower.

Public schools tend to be less expensive, and students are less likely to default on their student loans. Students at both public and private nonprofit schools are more likely to complete their bachelor's degree programs within six years than students at for-profit institutions.

Learning Outcomes

For-profit colleges exist to make a profit for their owners and investors. This mission makes earning money a top priority.

Nonprofit colleges typically aim to provide a high-quality education to a large number of students. As a result, they are more likely than for-profit schools to reinvest their profits into educational services.

Nonprofit schools put a higher percentage of their funding directly into education. They also have much higher graduation rates, on average, than for-profit schools.

Funding

Although most for-profit colleges rely on tuition alone for funding, nonprofit colleges have other options. Public colleges and universities receive funding from their state governments. This state funding allows public colleges to charge lower tuition rates to in-state students.

Nonprofit colleges also receive donations and endowments from wealthy benefactors to help support the school. Sometimes these gifts are earmarked for specific purposes, such as constructing a building named after the benefactor.

Affordability

According to NCES, average tuition and fees for undergraduates at public institutions are lower than the tuition and fees at private institutions. However, private nonprofit schools have a much higher average tuition rate than for-profit schools.

The same is true among graduate students. For the 2019-20 school year, the average graduate tuition and fees at public colleges and universities were $12,410. The average for private nonprofit colleges was $28,430 per year, and the average for for-profit private colleges was about $14,290.

These figures include only tuition and fees. To determine the true cost of attending college, you need to consider all expenses, including room and board, transportation, and lost wages.

Programs and Courses

For-profit schools often offer career-oriented training programs, such as cosmetology and massage therapy. Completing these programs may provide a pathway to a new career.

Some for-profit schools, such as Grand Canyon University, offer a variety of bachelor's programs in areas such as nursing, business, and teaching. For-profit colleges can also earn some types of accreditation. However, students should be sure to double-check the reputation of accreditation agencies.

Nonprofit colleges offer a variety of bachelor's programs, which may or may not be career-oriented. You are more likely to find programs like liberal arts and philosophy at a nonprofit college.

Both for-profit and nonprofit schools can offer synchronous or asynchronous online programs. If you want to attend college online, check with the school to see if it has classes for distance learners.

Admissions Process

Some nonprofit colleges allow students to use college application systems, such as the Common App, to apply for admission to more than one school at the same time. This is not usually an option for for-profit colleges. You'll have to apply through the school's website. However, admission requirements may be less stringent at for-profit schools.

You may or may not need scores from college entrance exams when applying to a for-profit school. However, if you do need to submit test scores, for-profit colleges often have lower minimum requirements than nonprofit schools.

Both nonprofit and for-profit schools may ask for letters of recommendation or college application essays. No matter which type of school you choose, you typically need to get official transcripts from your high school and any other colleges you've attended. If you have previous college credits, you may qualify for transfer credits at your new school. However, credits earned at a for-profit school may not be eligible for transfer.

Student Services and Resources

For-profit colleges are less likely than nonprofit colleges to offer student services, such as mentorship and career services. If you think you'll need to access student services, check to see what services are offered before choosing a school. Additional examples of student services include internship assistance, tutoring, and alumni connections.

Nonprofit vs. For-Profit: Which College Is Right for You?

Many students benefit from attending a public college or university. These nonprofit schools offer the most affordable option and the broadest variety of bachelor's degree programs.

However, some students may find that a for-profit school is more suitable for their needs. This is sometimes the case if a student is looking for career training rather than a bachelor's degree. For some careers, such as auto repair and plumbing, vocational training may be the preferred pathway to a career.

Students who have been turned down for college admission at a local public school may also want to consider applying to a for-profit school. However, they should be cautious when doing so.

Even though it may be easier to get into a for-profit school, that doesn't mean it is easier to graduate. Consider the lower graduation rate of for-profit schools and consider whether it's realistic that you'll be able to get through the program.

Frequently Asked Questions About Nonprofit vs. For-Profit Colleges

What does it mean to be a for-profit college?

A for-profit college exists primarily to make a profit for its owners, investors, or shareholders. Although many for-profit schools do strive to educate their students, the organization's primary goal is profit.

Unlike nonprofit colleges, for-profit colleges can't put everything they earn back into the education of the students. They must earn a profit for their investors.

On the other hand, nonprofit colleges cannot funnel money back to their managers. As a result, the money is reinvested into the school. This covers the cost of building improvements, campus landscaping, teacher salaries, and new curricula.

Are for-profit colleges easier to get into?

It is often easier to get into a for-profit college. In addition, for-profit colleges accept a larger percentage of women and students of color. Unfortunately, many for-profit colleges fail to follow through and don't always deliver the highest quality education to these historically excluded students.

Students are much more likely to drop out of a for-profit college before completing their program. They are also more likely to be left with student loan debt and default on their student loans. Additionally, the employment outlook is not as bright for for-profit college students.

Are for-profit colleges better?

If you look at the outcomes for nonprofit and for-profit colleges, nonprofit colleges come out on top. On average, they have higher graduation rates, higher graduate salaries, and lower student loan default rates.

For most students, nonprofit colleges are the better option.

However, for-profit colleges have less stringent admissions policies. If you're having trouble getting accepted to a college, they may be your best option. They are also better for many forms of vocational education. Nonprofit colleges may not offer programs for auto mechanics, cosmetology, or other vocational education programs.

Are Ivy League schools nonprofit?

Yes. There are eight Ivy League schools, and they are private and nonprofit. Those schools are Brown University, Columbia University, Cornell University, Dartmouth College, Harvard University, Princeton University, Yale University, and the University of Pennsylvania.

Although the term "Ivy League" originated in 1954, the Ivy League schools have been around much longer. Harvard has been around since 1636, Yale since 1701, and Princeton since 1746. Benjamin Franklin founded the University of Pennsylvania in 1740. Most of the Ivy League schools are located in the Northeast.