After Obama-Era Crackdown, For-Profit Colleges Seek Nonprofit Status

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WASHINGTON—Ashford College is one in all greater than a dozen for-profit schools throughout the nation seeking to turn out to be nonprofit establishments, a change that will make them topic to much less federal oversight and shed the often-maligned “for-profit” designation.

Switching “to nonprofit standing will enable Ashford College to…be judged and measured as schools and universities ought to be—on their means to help pupil success,” mentioned

Nolan Sundrud,

a spokesman for Bridgepoint Schooling, Ashford’s company proprietor, which introduced earlier this 12 months that it plans to transform the college’s tax standing.

The plan requires approval from each the Inner Income Service and the Schooling Division, which beneath the Obama administration tightened the definition of what it means to be a not-for-profit establishment.

A number of different outstanding for-profit chains are searching for comparable approvals from federal officers. The Dream Middle, a nonprofit non secular establishment, has bought a series of artwork institutes it’s hoping to transform to nonprofits, and Grand Canyon College, a web based faculty, can also be seeking to change over.

The shift follows the Obama administration’s crackdown on what it considered as predatory practices by for-profit faculties. The colleges say changing their tax standing would unencumber more cash to teach college students and redirect pointless authorities scrutiny.

“They’re getting sensible and getting forward whereas they’ve somebody pleasant in workplace,” mentioned

Clare McCann,

a higher-education coverage analyst on the New America Basis, a liberal-leaning assume tank.

The Schooling Division didn’t reply to a request for remark.

As extra faculties eye such a transfer, an unbiased advisory physique on the Schooling Division is weighing whether or not to make a proper coverage suggestion to Schooling Secretary

Betsy DeVos

on nonprofit conversions, outlining what faculties ought to be required to do to make the change.

Obama administration officers had sought to make sure that any faculty acknowledged as a nonprofit had basically severed ties with people or entities that would generate income off its operation. How far such necessities ought to go stays a topic of dispute.

Mrs. DeVos has provided restricted perception into her views on the follow, although her division has moved to roll again a number of Obama-era laws on for-profit faculties, and he or she has mentioned that such establishments give college students invaluable instructional decisions.

A number of of her senior aides joined the Schooling Division after advising for-profit faculty chains, together with

Robert Eitel,

who served as an lawyer for Bridgepoint via 2017.

Holding nonprofit standing has clear advantages. Such faculties save thousands and thousands in taxes, they usually keep away from many federal laws such because the so-called 90/10 rule, which limits for-profit faculties to receiving not more than 90% of their income from federal monetary assist. That rule, created in 1998, was meant to make sure that poor-quality faculties wouldn’t be propped up by federal assist .

For-profit leaders additionally say the collapse of two for-profit chains, Corinthian and ITT Technical institute, tarnished the business’s fame, making it more durable to draw potential college students.

“The actual cause that faculties transfer to a nonprofit standing is as a result of there was an assault on our sector that has clearly created some unhealthy public relations and pictures,” mentioned

Steve Gunderson,

a former Republican congressman who now heads Profession Schooling Schools and Universities, the for-profit business’s foremost commerce group.

In 2016, the Schooling Division beneath President

Barack Obama

blocked a series of for-profit faculties from changing to nonprofits after they had been acquired by a nonprofit group referred to as the Middle for Excellence in Larger Schooling.

The Middle bought the universities—together with Faculty America and Stevens-Henager Faculty—in 2012 for $636 million. As part of that transaction, the universities’ sole proprietor,

Carl Barney,

turned chairman of the nonprofit’s board of trustees.

The colleges obtained a tax-exempt designation from the IRS in 2013, however Schooling Division officers concluded that the conversion didn’t adequately remove the monetary advantages flowing to the universities’ house owners.

The Middle for Excellence in Larger Schooling’s chief govt,

Eric Juhlin,

mentioned he’s in talks with present Schooling Division officers to see whether or not they may come to a unique choice on the faculties’ standing.

“The earlier administration had a reasonably stable ideological agenda,” he mentioned. “The present administration is extra open to rationally discussing points.”

If Ashford College’s conversion is authorized, it will keep a relationship with Bridgepoint, its for-profit mother or father firm. The varsity, which operates on-line, would contract with Bridgepoint to offer lots of its educational and technical providers.

Critics say that association doesn’t adequately divorce the college from revenue incentives, permitting it to offer similar-quality schooling with much less scrutiny.

Lower than 1 / 4 of Ashford’s college students have paid something towards their pupil loans three years after leaving, in contrast with 46% of scholars nationally—a measure that specialists typically use to gauge whether or not a school helps its graduates get stable jobs.

“The aim of a nonprofit is to make sure there’s a defend between profit-making and selections which can be good for college kids,” mentioned

Bob Shireman,

a former Obama-administration higher-education official now on the Century Basis.

A Bridgepoint spokesman mentioned as soon as the conversion is full, Ashford gained’t have any ties with Bridgepoint and will discover a completely different on-line providers vendor if it chooses.

In recent times, Bridgepoint has attracted scrutiny from state and federal watchdogs. The California lawyer normal’s workplace is suing the corporate over what it says are unscrupulous enrollment practices, and the Division of Veterans Affairs final 12 months weighed chopping off monetary help via the GI Invoice to Bridgepoint.

Ashford spent 19% of its income on pupil instruction in 2016, in accordance with federal information, in contrast with a median 25% for all for-profit faculties. In contrast, Ashford’s spending on admissions and advertising and marketing amounted to 41% of income, it mentioned throughout a latest earnings name.

Write to Michelle Hackman at Michelle.Hackman@wsj.com



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