Lending

Students Weigh Higher Education Options

Attendance at for-profit schools has more than tripled in the past decade.

September 06, 2011
KEYWORDS loans , student
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Sorting out the schools

Simply choosing a university is more complicated today than it has been in the past. The market includes many types of higher education institutions, and students must decide which can best meet their educational needs.

To better understand and serve the financial needs of student-members, credit union lenders can use this guide.

The Institute for Higher Education Policy’s study of student loan delinquency, featured in the September Credit Union Magazine ("The growing student debt burden"), studied five types of higher education institutions: public four-years, for-profit four-years, private nonprofit four-years, public two-years, and for-profit two-years.

Here’s a quick look at the differences between nonprofit and for-profit schools, and public and private schools:

• Nonprofit schools. The traditional model for higher education is the nonprofit school. The nonprofit school is funded by state and private grants, as well as by tuition paid by students. Its primary goal is educating students, and is granted special tax privileges by the IRS.

An active board of trustees governs the school, and the board hires a headmaster. This way, the school can outlive its founder. Typically, nonprofit schools offer a broad liberal arts education, with the option for housing, meals, and student extracurricular activities.

• For-profit schools. A for-profit school is controlled by its owner or a small group of owners, and its primary objective is to make money or turn a profit. It’s typically more career-focused, sometimes with a vocational or technology slant.

It’s also generally more targeted toward adult and nontraditional learners. It offers the option to enroll part-time and take online classes more often than nonprofit schools.

Additionally, because the for-profit school is run like a business, it doesn’t have to respond to student concerns. All final decisions rest with the owner(s). These schools are also typically easier to get into, since every interested student can bring money in.

• Public schools. Public schools are largely supported by state funds. If a student attends a state university in his or her state, tuition is typically cheaper than at a private school. It’s lower because students and/or their parents pay taxes to the state, and their attendance, then, is less heavily funded by state funds.

But if a student attends a state university in a state other than where they reside, it can cost significantly more for them to attend. Public universities normally have a larger enrollment than private schools, and have a higher student-to-professor ratio.

• Private schools. Private school funding is made up primarily of income from tuition and endowments. Tuition is usually higher than at state schools, but there is also typically more scholarship money available to offset high tuition costs. Private schools normally have fewer students, and a lower student-to-professor ratio.

Private colleges can include religious, liberal arts, and technology colleges, as well as vocational and technical schools (although these last two also can be public).

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