What You Need to Know Before Attending a For-Profit College
There has been a rise in recent years of For-profit colleges and universities. These schools operate under a different model than traditional, not-for-profit schools.Private non-profit schools receive sponsorship from a church or other non-profit organizations, which help fund the school and guide its operations. Public schools, also in the non-profit category, receive much of their funding through tax dollars at both the state and federal levels.
For-profit colleges have a business structure that balances the educational needs of students with the demand to earn a profit from owners, which are often shareholders. These schools are funded through tuition and fees, rather than outside funding sources. Examples of For-profit schools include programs with specific industry focus such as auto mechanic tech training,or cosmetology. With many non-traditional students seeking higher degrees, a rise in degree earning Universities has also changed the landscape of For-profit schools.
The Rise of For-Profit Schools
Over the last ten years, students seeking specialty skills or non-traditional avenues for training gravitate to For-profit opportunities due to their flexibility and fast track options. Students seeking a program tailored to their schedule, allow them to hold down jobs and supporta family, gain from For-profit programs. Non-traditional students can take courses online, at night, and take breaks as needed. Most traditional formats cannot accommodate the higher need for flexibility, although students tend to pay a higher price for the benefit.
Regulators, on the other hand, have scrutinized For-profit schools. The higher cost of training does not translate to better jobs and higher wages, as seen in the private non-profit sector. Overpromising and underdelivering, along with significantly higher student loan default rates, has resulted in the demise of a number of popular colleges and technical schools.
Accreditation and Student Loans
All colleges and Universities which use federal student loans to pay for the educational needs of students must complete the same accreditation process. Students complete the FASFA form annually and qualify for aid based on financial need, thecourse of study, income and the household size. While students can qualify for free money such as grants and scholarships, For-profit schools largely rely on loans to fund the cost of education, leading to higher than average loan balances at graduation.
Key Benefits of For-Profit Schools
Flexibility is a key reason for the rise in popularity of For-profit institutions. Schools offer students the ability to complete a degree on their schedule. Targeting mostly non-traditional students, For-profit schools are not marketing to high school students on a traditional four or six-year path to a bachelor’s degree. Instead, they meet the demand of the working class, who want to improve their level of education to qualify for better-payingjobs.
As such, schools spend more money on marketing than non-profit counterparts. Non-profit schools spend less than 1% of their budget on marketing efforts, where For-profit schools spend closer to 23%, reducing funds spent on educating students.
Smaller class size and professional instructors. Keeping small class sizes gives students a higher level of attention, which can improve learning and retention. Partly due to smaller budgets, professors do not tend to receive the same level of pay non-profits offer. As a result, many professors currently work in the industry and teach part-time.
Low out of pocket costs. For-profit schools toutthe ease of entry and use of financial aid to pay for school as a key benefit. Students can enroll at multiple points during the year and begin almost immediately. There is not a long, arduous application process with high rejection rates. Schools also make it easy to apply and receive financial assistance leading to low or no out of pocket costs.
Targeted education. For-profit schools specialize, often allowing students to forgo traditional class requirements such as more math and science before beginning courses in the given specialty. Giving credit for work experience also supports a faster path to a degree.
Key Drawbacks of For-Profit Schools
Limited transferability. Low respect among traditional college and university systems can lead to the rejection of transfer credits if a student decides to switch schools before completing the program. Course credit does not always line up directly with traditional course curriculums, leading to the problem.
Lack of respect for the degree among employers. The number one issue graduates have is employer acceptance of the education provided at many For-profit schools. Students can lose out when competing against graduates from traditional schools, resulting in lower incomes and lower hire rates.. With the degree costing more, this can create an imbalance between the cost of the degree and the expected lifetime wages it will support.
Failure to provide aggressive placement programs. Upon degree completion, traditional schools offer job fairs and employment assistance to help students land high paying jobs. For-profit schools are slower to integrate these practices, leaving students on their own,with regard to employment.Taking a more proactive approach would improve their image in the business world and provide more job opportunities for graduates.
Student Loan Borrowing Patterns and Default Rates
Lower job placement rates, lower wages, and lower employer respect result in higher student loan default rates. For example, in 2015, nonprofit schools reported graduating students with average loan balances of $30,100.In 2012, For-profit schools reported average balances at graduation of $39,950, with 88% of students relying on loans. In addition to higher borrowing rates, they also have higher default rates. In 2013, For-profit schools estimated 15% of former studentshad defaulted, while public schools only experienced a 7% default rateand private schools at 11.3%.
Choosing a school to earn a degree or certificate is one way to increase earnings. However, part of the decision-making process should also include a review of the quality of the degree and job opportunities after graduation. Before enrolling in a For-profit college that makes it easy to get started, investigate the job options at the end of the road.