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Private nonprofit colleges tend to be expensive because they rely on tuition and investments to fund their operations, unlike public institutions that receive a greater amount of government support. Colleges are also increasingly spending more on a wide range of campus resources, further driving up costs for students. As a result, attending a private nonprofit college may necessitate taking out more in student loans to cover those costs.
Key Takeaways
- Private nonprofit colleges often have higher operational expenses, largely due to fewer government subsidies.
- Investment in student services and facilities also contributes to higher tuition costs.
- A lack of federal regulation allows colleges to increase tuition rates at their discretion.
Factors Contributing to High Costs
The rising costs associated with pursuing a higher education at a private nonprofit college can be attributed to a few different factors. First, these schools receive less in the way of government funds. According to the National Center for Education Statistics (NCES), private nonprofit institutions got only 9% of their total revenue from government funding in fiscal year 2020–21.
Note
Private universities only have a few options for securing federal funds. These include funds for student financial aid and work-study programs, research grants, technology grants, and federal partnerships.
Additionally, the federal government doesn’t regulate tuition costs. As a result, all types of higher education institutions are incentivized to keep raising tuition in order to secure as much government funding as possible. Meanwhile, private schools have increasingly invested more funds into campus amenities and student services, rather than academic opportunities, to attract prospective students.
Comparison With Public and Private For-Profit Institutions
The cost of attendance (COA) at a private nonprofit college can differ significantly compared to that of a public or private for-profit institution. Much of this has to do with how much institutions are spending and where they’re getting their revenue.
Based on data from the NCES for the 2020–21 fiscal year, total expenses per full-time-equivalent (FTE) student at private nonprofit four-year colleges totaled $69,150, compared to $52,900 at public four-year colleges and $17,660 at private for-profit four-year institutions. Meanwhile, during the 2020–21 academic year, the average on-campus COA for private nonprofit colleges was $54,500. For public institutions, it was $25,700, and for private for-profit four-year colleges, it was $33,500.
In terms of revenue, public colleges received 40% of their funding from federal, state, and local governments during the 2020–21 fiscal year, which helps explain why they had the lowest average COA despite having the second highest total expenses per FTE student. Private nonprofit institutions relied more heavily on investments, which made up 46% of their revenue. Private for-profit institutions, meanwhile, generated 93% of their revenue from tuition and fees, and they receive even less in government funding than their nonprofit counterparts.
The Bottom Line
The high COA at private nonprofit colleges can be attributed to less government funding, overinvestment in campus amenities and facilities, as well as a lack of government regulation of tuition costs. As a result, a private nonprofit school is typically the most expensive option when it comes to pursuing a higher education. At present, college affordability remains uncertain for future students, especially without any government intervention.
