Do you ever wonder how private universities get money? Is their funding from the federal government? How do they use their funding? Have no fear, because this article will answer all your questions.
In general, private universities in the U.S. do not get federal funding, however there are ways they can receive federal funding. Universities will mostly rely on other methods to gaining funds, while facing certain challenges that come with them.
Questions we will answer in this article include:
- How private universities generally receive funding
- How private universities are able to receive federal funding
- Why don’t private universities receive federal funding?
- And more!
How Private Universities Generally Receive Funding
Tuition Fees
This is substantially the main source of revenue for private universities. They will usually be higher than public universities to accommodate market demand, financial aid policies, and all other operating expenses.
Donations
Endowments from generous donors like alumni, corporations, and philanthropists are another financial support system for private universities.
Auxiliary Services
Auxiliary services like housing, school-owned stores, sport facilities, and dining facilities can produce another stream of revenue for the school.
Partnerships and Sponsorships
Universities will lend out their resources or expertise to business and corporations to garner more revenue. Partnerships can range from internships, sponsored research, or joint projects.
How Private Universities Are Able to Receive Federal Funding
There are only a few ways that private universities receive funding from the government. Those few instances are typically for specific purposes.
Research Grants
Private colleges are able to acquire some federal funding through research grants given by government agencies. Those agencies include the National Institutes of Health (NIH) or the National Science Foundation (NSF). These grants are typically not given to public universities.
Technology Grants
Private universities can also apply for federal funding to finance specific technological improvements. Including school security grants such as the School Safety Grant Program (SSGP) and educational technology grants like CARES Act funding.
Student Financial Aid
Students that plan on attending private schools can opt in for federal student aid, meaning that the school will be receiving that federal aid to cover tuition and other educational fees. Students can apply to federal grants as well, as another source of financial aid.
Work-Study Programs
Most schools utilize work-study programs, including private schools. Students at private universities can have the opportunity to work part-time to receive financial aid, which is federally funded.
Federal Partnerships
Schools can enter into contracts with federal agencies for specific expertise or services. They can also create collaborations to set up research projects, which will draw in federal funding.
Veterans Benefits
There are educational benefits for veterans and their dependents, through the Department of Veterans Affairs. They offer several programs that will provide aid to students attending private universities.
Why don’t Private Universities Receive Federal Funding?
Federal freedom
Without federal funding, the private university is able to operate without any restrictions from the federal government. That means that they have the freedom to institute their own criteria for admissions, school policies, and academic programs.
With this, they will also have more flexibility than public universities.
Competitive market base
Since private universities seek money elsewhere, they use a market-based approach, where they use the market to regulate the costs of tuition. This approach raises competition for their school and increases diversity amongst students.
History of philanthropy and donations
For a long time, private universities have relied on their funding coming from donations and philanthropy. With donations, the government will give the private school tax incentives and deductions to promote this source of funding. They can also be used for resources beyond tuition fees, like scholarship programs, new facilities, and research centers.
What funding challenges do private universities face?
Private universities do face certain challenges since they acquire their funding in other ways.
Tuition dependency
Since private schools are heavily dependent on tuition, they can face challenges when it comes to enrollment numbers changing. If the numbers are decreasing, the school will start to struggle to gain enough funding for operation expenses.
Rising Costs
When a university has to raise costs on anything, budgeting will become a larger problem. Problems can come from maintaining infrastructures, making advancements to resources, and modifying salaries.
Securing donations
Collecting donations isn't always securable from consistent donors and support systems, year to year. Schools work to maintain their reputation to help attract donors.
Maintaining regulations
If the private university does not comply with certain regulations or doesn't ensure their accreditation title, they could potentially be losing funds and donations.
How do Private Universities Overcome Challenges?
Since there are a few challenges that come with being a private university, these schools have learned ways to overcome those struggles by adopting several strategies.
Alumni fundraisers
Schools will work hard on engaging alumni so that they can potentially give back to that private university through donations and fundraisers.
Online Education
Having an online education program helps expand the university’s incoming revenue as they allow a wide variety of people to enroll in classes.
Public-Private Partnerships
A public-private partnership is when the university collaborates with government entities, non-profit organizations, and industry partners to provide the university extra funding opportunities. They also share resources with collaborators and help solve particular challenges together.
Do Private Universities Get State Funding?
While public universities are funded by state governments, private universities do not receive any funding from the state. However, there are a few exceptions.
The exceptions are similar to the federal exceptions including:
- State grants and contracts
- State financial aid programs
- State tax benefits
State funding can change based on the state, as not all states have the same kinds of support in funding.
Can you still get federal loans if you attend a private college?
Yes, regardless of what type of college or university you attend, you are eligible for federal student aid or FAFSA. This is where students can apply yearly for aid towards tuition, provided federally.
In fact, private schools give more financial aid than other types of schools. They do this to offset the price of tuition. Offering aid keeps their prices more competitive and increases its marketability to students who typically wouldn’t consider attending the private school.
How do private schools invest in their students?
There are many ways that a private college can give back to their students with the money they are funded with. Doing so is important for supporting their students and ensuring academic excellence.
Small class sizes
Having smaller class sizes in private schools allows for the student to have more one-on-one time with their educator. The student is able to learn more efficiently with this as educators can easily focus on the student’s strengths and weaknesses.
Qualified teachers
Private schools work to have the best qualified teachers teaching at their schools. They seek teachers who are experts in their designated fields and already have experience. Private schools also set up support for their teachers, like professional development programs to improve their skills further.
Support services and resources
Private schools try to meet the needs of their diverse student body by investing money into support services and resources. These services can range from academic advising, diversity and inclusion services, and IT services. They help students feel included and supported at their school.
Academic programs
Most private universities prioritize academic excellence and institute programs to ensure that a student is receiving the best education possible. This can include STEM initiatives, art programs, and foreign language programs.
What is the difference between nonprofit vs. for profit universities?
Depending on whether a private school is a nonprofit or for-profit school can help you understand how they explicitly get their funding, and what they do with it.
Different structures
Nonprofit schools are meant to serve the public interest while furthering higher education. All the profit made is reinvested back into the school to support it.
For-profit schools are seeking a profit, but that profit is meant to go back to the shareholders or owners. The profit can also be used as operating expenses.
Nonprofit schools are run by a board of trustees whereas the for-profit schools are run by investors or corporations.
Different missions
Nonprofit schools tend to emphasize community engagement and academic excellence.
While for-profit universities are more profit-driven. They do amplify their education, but split their focus on marketability.
For-profit universities that are private typically charge less on tuition than nonprofit universities. But sometimes the low costs aren’t always a good thing. They tend to not offer as much as a nonprofit school would. There are less services provided to students, with limited accessibility to services like counseling, tutoring, and an academic library.
For-profit schools typically offer trade programs including culinary arts, cosmetology, and engineering technology.
Different graduation rates
There is a difference in graduation rate percentages at nonprofit schools and for-profit schools. Studies show that in recent years, private nonprofit institutions had a 68% graduation rate whereas a private for-profit institution had a 29% graduation rate.
Different admission processes
The admissions process for for-profit schools are less strict, meaning that the likelihood of being admitted into the school is higher.
Nonprofit schools typically have more requirements in their admissions process.
That concludes our piece on whether private universities get federal funding (or not)
Knowing how private universities get their funding is important to know if you are planning to attend one. Each private university is different, so be sure to thoroughly research a school further to find out what they do with their funding, their investments, student life, etc.
