Nonprofit vs. For-Profit Colleges: Key Differences

Nearly all higher education institutions can be broken down into two main types of colleges: nonprofit and for-profit. The profit status of a college refers to the funding status of the school and what the school does with any profit after expenses are covered.

What Is a Nonprofit College?

Non-profit universities receive state funding and endowments, in addition to any funding they generate through tuition and fundraising. As a result, most state universities are non-profit. Non-profit universities are sometimes run by private institutions, though. Their status as a non-profit isn't negated by how they receive funds, it's all about how the school allocates any profit.

To maintain non-profit status, any profit generated from tuition or fundraising needs to be returned to the school, usually in the form of:

• Hiring staff
• Updating campus features
• Providing expanded student services

Nonprofit organizations are usually run by a board of trustees as opposed to a business or other such entity.

What Is a For-Profit College?

For-profit universities are usually run by private institutions. Unlike non-profits, they can divide profit among investors and other stakeholders. Because they don't receive any state or federal funding, they rely exclusively on:

• Tuition
• Investment
• Loans to fund school activities

Many colleges that only offer online programs tend to be for-profit schools because the online nature of schooling can help reduce costs associated with campuses or staffing. There are also usually fewer student services and school-sponsored activities like sports or health services, but that doesn't mean you can't find these things at a for-profit school.

What Are the Key Differences Between For-Profit and Nonprofit Colleges?

Aside from the obvious differences in profit allocation, nonprofit and for-profit institutions have many key differences that students should consider before applying for enrollment.

Degree Programs

For nonprofit schools, degree programs tend to be more traditional. Although many are starting to expand to include hybrid and even fully online programs, on-campus four-year degree programs are still the norm for nonprofit institutions. For high school students looking to pursue a bachelor's or master's degree, non-profit schools will have a lot more options.

For-profit schools often have more specialized degrees or fewer options for bachelor's degrees. Although there are bachelor's degree options through these schools, many of these colleges will offer:

• Two-year degrees
• Certifications
• Other similar career-focused programs, like vocational schools

Accreditation

Colleges will either have national or regional accreditation. Accreditation is awarded by independent agencies to try to ensure that a college provides high-quality education. Usually, non-profit schools are regionally accredited with for-profit schools receiving national accreditation. Regional accreditation usually has more strict standards for students.

Cost of Education

A few factors need to be evaluated when looking at the price tag for college. The in-state rates for public schools almost always have lower tuition than their for-profit counterparts. However, private non-profit schools often have rates higher than for-profit private colleges.

Financial aid options are more available through non-profit schools, as profit can be turned into scholarships and other options. Federal financial aid is usually available to qualifying students regardless of the school they are attending, which can increase the affordability of college.

School Funding

One of the biggest differences between the two types of colleges is the funding. Non-profit universities receive governmental funding to further supplement tuition and any donations from alumni. For-profit colleges usually receive funding from investors to supplement tuition. Profit is then shared back to stakeholders instead of being reinvested into the school.

Admission Process

For-profit universities almost always have higher acceptance rates than non-profit universities. The biggest reason for this is that tuition payments are required to make the school money. Admissions are the best way to ensure more students come into the school.

Student Resources

Non-profit schools aren't allowed to allocate profit to shareholders, so most schools reinvest profit into student services and resources that enhance the student experience. This can be health care, tutoring services, and even financial support. For-profit schools, especially online-only schools, will have much more limited student resources due to the costs associated with these programs.

Reputation

In the eyes of most Americans, non-profit schools have a much better reputation than for-profit colleges. Part of this has to do with the nontraditional nature of most for-profit schools. Many have looser requirements for test scores and higher acceptance rates, which can create the reputation of being easier or less valuable when compared to strict requirements at non-profit schools.

Graduation Rates

Even though non-profit schools have lower acceptance rates, on average they tend to have higher graduation rates. Non-profit schools, both private and public, have graduation rates for four-year degrees over 60% within 6 years. For-profit schools have a graduation rate for four-year degrees of less than 30% within 6 years.

Should You Choose a Nonprofit or For-Profit College?

For most students, non-profit universities will provide a better college experience and set up graduates for more success in their careers. Students who graduate from a non-profit college will, on average, see higher salaries and lower debt after graduation. The advantage of for-profit schools is their specialized nature. Students looking for more vocational-based training, are more likely to be accepted to a for-profit college and receive the focused schooling they are after.

FAQs about For-Profit Vs. Nonprofit Colleges

Here are some answers to frequently asked questions about nonprofit and for-profit colleges.

Should Universities Be Non-Profit?

Universities don't have to be non-profit, but there are benefits. One of the biggest is that more money will be returned to the school, so you can be assured that your tuition is being used for your education.

What Are the Disadvantages of For-Profit Colleges?

Although for-profit universities can provide learning opportunities for college students of various backgrounds there are several clear disadvantages:

• Transfer credits coming from for-profit universities are often harder to transfer.
• Students at for-profit universities often have higher debt from student loans
• Students have lower graduation rates from for-profit colleges than at non-profit schools

Is Harvard University a Nonprofit?

Harvard is a non-profit, but it isn't public. Harvard University, like the rest of the Ivy League schools, is a private non-profit. Because of the non-profit status of the school, Harvard has tax exemptions in terms of property the school owns and donations that the school receives.

Are There Good For-Profit Schools?

There are good for-profit private universities, but most of these schools benefit from a few specialized training programs as opposed to multiple programs like non-profit universities. For vocational programs, there are good for-profit colleges.

Find the Right University For You

If you want more information on profit and non-profit colleges, start with Learn.org's database of articles and resources. Find out more about colleges and degree programs across North America and begin your higher education journey today.