For-Profit Colleges: What the Data Says

Colleges in the United States fall into three categories based on their tax and ownership structure:

• Public: Funded by state governments, operated as state agencies or public trusts. Examples: University of Texas, California State University system, community colleges.
• Private nonprofit: Operated by nonprofit organizations, governed by boards of trustees. Tuition revenue and donations go back into the institution. Examples: Stanford, Notre Dame, Amherst.
• Private for-profit: Owned by individuals, partnerships, or publicly traded corporations. They operate to generate profit for owners or shareholders. Examples have included University of Phoenix, DeVry University, and various smaller career-training schools.

The for-profit distinction matters because the institution's financial incentive is different. A nonprofit college reinvests revenue into education. A for-profit college distributes some portion of revenue to owners or investors. This does not automatically mean the education is worse, but it creates a structural tension between spending on instruction and generating returns for shareholders.

IPEDS data consistently shows that for-profit institutions have lower graduation rates than public and private nonprofit schools:

• Four-year for-profit institutions: The 150% graduation rate (six years for a bachelor's degree) is typically in the range of 20-30%, compared to roughly 60-65% at public four-year institutions and 65-70% at private nonprofit four-year institutions.
• Two-year for-profit institutions: Completion rates within 150% of normal time are often below 50%, though some certificate programs have higher completion rates because they are shorter.

For-profit schools argue that their students face more barriers: older, working, lower-income, first-generation. That is true. But when researchers compare for-profit outcomes to those of community colleges serving similar populations, the for-profits still underperform on graduation rates while charging significantly more.

The National Center for Education Statistics has published multiple analyses confirming these patterns across thousands of institutions.

The most damaging data on for-profit colleges comes from the intersection of how much students borrow and how much they earn afterward.

College Scorecard data shows:

• Higher borrowing: Students at for-profit institutions borrow at higher rates and in larger amounts than students at comparable public institutions. For-profit students are more likely to take out the maximum available federal loans.
• Lower earnings: Median earnings for graduates of many for-profit programs are lower than median earnings for graduates of similar programs at community colleges, despite the for-profit programs costing two to five times more.
• Higher default rates: Historically, for-profit colleges have accounted for a disproportionate share of federal student loan defaults. While enrolling a smaller share of all students, they have produced a larger share of borrowers who default.

A 2023 analysis by the Department of Education found that graduates of some for-profit programs earned less than high school graduates in the same region, meaning the degree provided negative economic value when debt payments were factored in.

The federal government has taken significant actions against for-profit colleges over the past decade:

• Corinthian Colleges: Closed in 2015 after the Department of Education found evidence of misrepresentation to students. Over 560,000 borrowers received 5.8 billion dollars in loan discharges.
• ITT Technical Institute: Closed in 2016 after being barred from enrolling new students using federal financial aid.
• The Art Institutes system: The Department of Education approved 6 billion dollars in loan relief in 2023 after finding that the system had misrepresented outcomes to students.
• Gainful Employment rule: The Department of Education's rule requires career-training programs (mostly at for-profits) to demonstrate that graduates earn enough to repay their debts. Programs that fail this test lose access to federal financial aid. The rule was finalized in 2023 after being previously enacted and then repealed.

When a for-profit school closes suddenly, students may be left with credits that don't transfer, partial degrees that aren't recognized, and loan debt for an education they didn't complete. Borrower defense and closed school discharge programs exist to help, but the process is slow and not all students know they are eligible.

Not every for-profit program is predatory. Some operate ethically and serve students well. A for-profit program may be worth considering if:

• It has programmatic accreditation from a recognized body in the field (e.g., ABET for engineering technology, CAAHEP for health programs)
• College Scorecard shows strong earnings for graduates of that specific program at that specific school
• The total cost is competitive with community college or public university alternatives
• The graduation rate is reasonable compared to similar programs at nonprofit institutions
• It offers scheduling or format advantages that genuinely do not exist at public alternatives in your area

The bar should be higher for a for-profit program because the structural incentives work against you. A public community college has no shareholders to pay. If a for-profit charges three times as much for the same program, it needs to deliver three times the value to justify the cost. The data says most don't.

If you are considering any college, but especially a for-profit, take these steps:

1. Check accreditation. Use the Department of Education's DAPIP database (ope.ed.gov/dapip) to verify regional/institutional accreditation. If the school only has national accreditation, your credits likely won't transfer.
2. Check College Scorecard. Look at the specific program you would enroll in, not just the school overall. What do graduates earn? What is their debt? What is the loan repayment rate?
3. Compare costs to public alternatives. Before enrolling in a for-profit nursing program at 40,000 dollars per year, check what your local community college charges for its nursing program. If the credential is the same, the cheaper path is the smarter one.
4. Search for regulatory actions. Google the school name plus "lawsuit," "closure," "sanctions," or "Department of Education." If there is a pattern, take it seriously.
5. Talk to employers in your target field. Ask hiring managers whether they view the school's credential the same as a degree from a public or nonprofit institution. If the answer is no, the degree won't get you hired regardless of what the school promises.

Education is an investment. Like any investment, due diligence protects you from losing money on something that doesn't deliver. The data is publicly available and free. Use it before you sign anything.