For-profit, Nonprofit, and Your College Options

Watch this video from our Personal Finance 101 Conversations series to examine the costs and benefits of various post-secondary education options including community colleges, technical colleges and universities, and more recently, for-profit colleges.

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Are you considering continuing your education by attending a university, community, or technical college? How will you go about choosing a school? Did you know that in addition to public and private colleges and universities—which operate as non-profit agencies—there are schools that operate for a profit just like a private business?

You may be wondering why that matters, but you’ll be wise to…do your homework… when it comes to choosing a school.

In a previous Personal Finance 101 Conversation, we showed some items to consider when comparing public and private colleges. In this episode, we’ll go a step further and look at some differences between profit and not-for-profit schools so you can start thinking about what might be best for you academically, professionally… and for your budget.

Depending on your life circumstances, there are several elements to consider when investigating any school, but here are some things you might want to think about when it comes to for-profit institutions:

For-profit schools may provide educational opportunities to people who might not otherwise go on to post-secondary education. Compared to other higher education institutions—like community colleges and 4-year public and non-profit colleges—for-profit schools have more Hispanics, African Americans, women, and people with significantly lower family incomes as students. Additionally, compared to community colleges, a disproportionate number of students at for-profits are single parents, and students at for-profits are almost twice as likely to have a General Equivalency Degree or (GED) than students at community and 4-year public and nonprofit colleges.

Acceptance rates at for-profit schools are high and usually only require a high school degree. This means students who may not have thought about college previously—or even didn’t do so well in preparation for life after high school—still have the opportunity to go to school.

When deciding what kind of school to choose, keep in mind what kind of job you might want or in what industry you might want to work. For-profit institutions tend to focus on training students in a specific vocation or trade, instead of offering general education or liberal arts programs that prepare for further schooling like many four-year universities do.

Consider the format of instruction that might be best for you. A significant part of the for-profit school business model is online education. This tends to be more flexible. A less structured format may attract students who find themselves needing to balance other responsibilities, such as work or family, with school attendance.

The previous points are good ones to consider, but cost of attendance and student outcomes should also be factored into your decision. To make a wise educational decision it’s always important to read the fine print and not go solely by what’s advertised!

For-profit schools tend to be expensive. In 2017-18, for example, the average tuition and fees for students enrolled full-time in for-profit institutions was $14,000. That’s about 1.4 times higher than attending an in-state four-year public school, and about 4 times higher than going to a two-year public college in the same year.

To pay the tuition at for-profit schools, the majority of students take out student loans: 83% of students, compared to 66% at public colleges and 68% at private non-profit schools. The average total amount of student loans per person is also greater for students who went to a for-profit school: $39,900, versus $26,900 for public and $31,450 at a private nonprofit.

For-profit schools have higher first-year retention rates and completion rates for shorter certificate and degree programs. However, the students at these schools, who are attending post-secondary school for the first time, also end up with more debt, and higher default rates. They also experience higher unemployment rates after graduating. Six years down the line, they see lower earnings than similar students who went to public or non-profit schools.

Recently, one of the largest for-profit schools settled a major lawsuit that arose after students reported being subjected to deceptive recruiting practices. The company forgave millions of dollars in student loans for students who weren’t able to get jobs in the field for which they trained, with some students lacking accreditation to be licensed to work in their field.

News stories like that one make it clear that no matter whether you are interested in a public, private, or for-profit college, you should do your homework and choose your school and program wisely. While for-profit programs may be more specialized and allow for more flexibility, a risk with them is that many students end up ill prepared for the types of jobs they want. In terms of income, researchers found that in the top ten fields of study, only cosmetology students who attended for-profits ended up with higher incomes than students who attended public institutions. Of course, future income potential is an important consideration for any type of educational endeavor. You can learn more by researching schools and inquiring with them about retention, graduation, and job placement statistics.

Whatever your past academic and personal experiences or your present circumstances, planning the next phase of your educational journey is worth the effort. As you consider the options, carefully weigh the costs and benefits of your options. The choices you make can affect you in the short and long run, academically, professionally, and financially.


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Education Level: 9-12 College Non-educators
Subjects: Personal Finance
Concepts: Interest Paying for College
Resource Types: Video
Languages: English
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