But President Trump’s biggest — and most lasting — gift to for-profits could come from his administration’s willingness to provide them with an escape hatch, in the form of converting their tax status to nonprofit. For-profit companies need the department’s blessing to make such a move, and under DeVos, the agency has been more receptive to those applications than it was under President Barack Obama. To take effect, such “conversions” also must be approved by accreditors and the Internal Revenue Service.
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But President Trump’s biggest — and most lasting — gift to for-profits could come from his administration’s willingness to provide them with an escape hatch, in the form of converting their tax status to nonprofit. For-profit companies need the department’s blessing to make such a move, and under DeVos, the agency has been more receptive to those applications than it was under President Barack Obama. To take effect, such “conversions” also must be approved by accreditors and the Internal Revenue Service.
On Tuesday another big company threw its name into the mix, as San Diego-based Bridgepoint Education announced plans to combine its two for-profit colleges, the University of the Rockies and Ashford University, and make the newly consolidated Ashford University a nonprofit institution.
“For us, it’s always been, and always will be, about the students,” wrote Vickie Schray, Bridgepoint Education’s executive vice president for regulatory affairs and public policy, in an email to The Chronicle. “Merging with University of the Rockies will create a comprehensive university that includes undergraduate programs from Ashford, master’s programs from both universities, and the doctoral programs currently offered at University of the Rockies. This combined, independent nonprofit university will be even better equipped to serve the needs of students; the move will open new paths and create increased opportunities for the students of both institutions.”
Bridgepoint hopes to have its conversion approved by regulators and its accreditor, the WASC Senior College and University Commission, by the end of the year. As part of the plan, Bridgepoint will separate itself from the newly nonprofit Ashford University but team up with it as a provider of online-program management. Bridgepoint now enrolls more than 40,000 students, at Ashford and the University of the Rockies.
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‘Prove It’
Converting to nonprofit status carries quite a few regulatory perks, although Schray said the different rules for nonprofits “had no impact on our decision.”
For-profits are prohibited from receiving more than 90 percent of their revenues from federal Pell Grants and student loans, but nonprofits operate without any such restriction. Nonprofit colleges are also less affected by the Obama-era “gainful employment” regulations, which seek to punish academic programs whose graduates are weighed down by heavy debts and few career prospects.
The Education Department under DeVos is pushing to weaken the penalties for colleges that fail the gainful-employment standards, but that effort might amount to only a temporary reprieve. If a Democrat occupies the White House after the 2020 election, federal regulators could resume an aggressive crackdown on for-profit colleges. Those clouds of uncertainty have prompted the current frenzy of restructuring among the colleges.
Investors don’t want to own a company that they can only own when there’s a Republican in the White House.
“All of the publicly traded companies are going to pursue something like this, and we’re going to continue to see these kind of announcements from companies,” said Trace Urdan, a managing director at Tyton Partners, an investment banking and consulting firm focused on the education sector. “They have no idea what their regulatory situation is going to look like after 2020 … investors don’t want to own a company that they can only own when there’s a Republican in the White House.”
But it is the checkered track records of many for-profits that have helped fuel skepticism about whether they can truly evolve into nonprofit institutions. The lawsuits, attorney-general investigations, and other probes into abuses by the for-profit-college industry repeatedly have identified evidence of institutional dishonesty and greed.
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Recurring accusations have included students’ being lied to about the accreditation of their programs, students’ being persuaded to enroll based on phony job-placement rates, and students’ being pressured into taking out predatory private loans, on top of their already-huge federal student-loan debts.
Ben Miller, the senior director for postsecondary education at the Center for American Progress, said he would like to see more specifics from for-profit colleges that are promising improved “quality” under a new nonprofit version of themselves.
“You can’t put out a press release that just vaguely says doing this deal is going to increase quality without actually saying what you’re going to do to make the quality better,” Miller said. “You can’t just say, ‘We’re going to be nonprofit, ergo, we’re going to be quality now.’ You actually have to do something to prove it.”
No Guarantee of Quality
A 2015 report by the Century Foundation expressed alarm at the growing trend of for-profit colleges’ pursuing nonprofit status, and suggested that some owners had successfully obtained nonprofit status “while engineering substantial ongoing personal financial benefits for themselves.”
Whether or not a college’s internal workings change under its new “nonprofit” label, that label itself has marketing power. Consumers have been barraged with negative coverage of the for-profit-college industry in recent years. It’s no accident that nonprofit online universities frequently mention their nonprofit status in TV commercials for their degree programs.
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But nonprofit status, by itself, is no guarantee of quality, particularly if the nonprofit institution has a history of problems. The Chronicle asked the National Association of Independent Colleges and Universities, which represents nonprofit colleges, if a poorly performing for-profit college could sully the “nonprofit” brand if its troubles continue after changing its tax status.
“If that institution gains nonprofit status and continues its bad acting, that would be bad not just for the nonprofit sector, but for all of higher education,” replied Pete Boyle, vice president of public affairs. “More importantly, it would be terrible for students.”
Michael Vasquez is a senior investigative reporter for The Chronicle. Before joining The Chronicle, he led a team of reporters as education editor for Politico, where he spearheaded the team’s 2016 Campaign coverage of education issues. Mr. Vasquez began his reporting career at the Miami Herald, where he worked for 14 years, covering both politics and education.