Are for-profit colleges bad? It depends.
Some provide useful skills training, but others might be overpriced or don’t provide as valuable or affordable an education as their nonprofit counterparts. What’s more, some for-profit schools can be downright predatory, taking students’ money without providing sufficient value in return.
If you’re considering a for-profit college, here are six potential issues to look out for, so that
Are for-profit schools bad? 6 issues to be aware of
As private businesses, for-profit schools are first and foremost, a business. If you attend one, you could end up shelling out a lot of money without getting much of a return on your investment.
Before you enroll, here are six issues to watch out for if you’re looking at for-profit colleges:
1. They often cost more than traditional colleges
2. They might spend less on your education
3. You could end up earning less
4. Their job placement statistics can sometimes be misleading
5. If your school closes, credit transfers might be difficult
6. In some cases, community college might be a better option
For-profits may sound like a good option for someone who doesn’t have the time or money to attend a four-year college or university. However, the price tag could set you back far more than a nonprofit school.
Annual tuition and fees for a public two-year, in-district school are $3,730, according to CollegeBoard for 2019-2020. For a public four-year, in-state school, they are $10,440. And for a for-profit college, they are $14,600.
Let’s say you study for two years to earn your associate degree. You’d save an estimated $21,740 by choosing a community college over a for-profit school. If you chose a four-year public college over a for-profit college, you’d save $16,640 over four years.
According to The Century Foundation, for-profit schools typically spend less than half of their revenue on student instruction, while nonprofit colleges generally spend more on instruction than they take in as tuition revenue.
How does the student fare in this scenario? According to the National Center of Education Statistics (NCES), the six-year graduation rate for students pursuing a bachelor’s degree at for-profit schools is only 21%, as opposed to 60% at public schools and 66% at private nonprofit colleges.
For this reason, you’ll want to take a close look at graduation rates before enrolling.
According to the National Bureau of Economic Research (NBER), students who earn certificates at for-profit schools are less likely to be employed than students who attend public institutions. Those who do get jobs have 11% lower earnings than their public college counterparts.
While some for-profit schools might lead to great earnings, the data means that you’ll want to think carefully about your return on investment before going this route. Look for stats on post-graduation outcomes. Ideally, you can dig up some data from impartial sources or speak to students themselves rather than relying solely on the school’s advertisements for insight.
The job placement rates for-profit colleges advertise are not always accurate. In some cases, these numbers could be inflated and don’t necessarily include work found in the field that graduates studied.
If you decided to get a for-profit education for a degree in massage therapy, but end up working at Home Depot, then a lower-quality school might count that as a “placement.”
So even if a job placement rate sounds promising, do some digging. That number might not truly reflect the percentage of students who found work in their field.
Let’s say you’re already attending a for-profit school, and all of a sudden, your school closes.
With for-profit colleges, this is not infrequent. In fact, in the fall of 2016, one of the best-known for-profit colleges, ITT Technical Institute, closed its doors.
The good news is, students with federal loans might be eligible for student loan discharge if their school closes. But this doesn’t apply to those who’ve already completed their programs.
What’s more, the Department of Education has recently sought to limit borrowers’ access to student loan discharge through the borrower defense to repayment program.
Students whose schools are still open might also find that their credits don’t transfer to other universities the way they hoped. This could be an issue if they intend to switch to another school or seek a higher degree later on.
Many prospective students see for-profit colleges as a more flexible way to earn a degree. And that’s exactly what for-profit schools want you to think.
However, even if you’re a working parent or don’t have the GPA to get into a four-year public university, you don’t have to turn to a for-profit education.
Look to your local community college. There’s a chance it’ll be cheaper, offer night classes and allow you to attend part-time if necessary. Not only might you get a better education, but you might also obtain better results after graduation.
And if you want to earn your bachelor’s degree, you can likely transfer your credits from a community college to a four-year school.
With this in mind, make sure you carefully evaluate the pros and cons of any for-profit school before signing up.
Rebecca Safier contributed to this report.
Need a student loan?Here are our top student loan lenders of 2020!
|1.24% – 11.44%1||Undergraduate, Graduate, and Parents|
|1.25% – 11.15%*,2||Undergraduate and Graduate|
|1.24% – 11.98%3||Undergraduate, Graduate, and Parents|
|1.24% – 12.49%4||Undergraduate and Graduate|
|1.80% – 11.89%5||Undergraduate and Graduate|
|2.71% – 12.99%6||Undergraduate and Graduate|
|3.52% – 9.50%7||Undergraduate and Graduate|
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers. |
1 Important Disclosures for Earnest.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 9/24/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.
4 Important Disclosures for Discover.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
5 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.76% annual percentage rate (“APR”) (with autopay), variable rates from 1.90% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.83% APR (with autopay), variable rates from 1.80% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.98% APR (with autopay), variable rates from 1.97% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 11.26% APR (with autopay), variable rates from 1.90% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 07/10/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).
6 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicant’s ability to supply the necessary information for submission.
7 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.17% effective Sep 1, 2020 and may increase after consummation.