Report Questions Nonprofit Conversions

A new report from the Century Foundation questions the legitimacy of four former for-profit colleges' recent transformations to nonprofit status. Those institutions are "covert for-profits," according to the report, "where owners have managed to affix a nonprofit label to their colleges while engineering substantial ongoing personal financial benefits for themselves."

The report's author is Robert Shireman, a former U.S. Department of Education official who recently joined the foundation as a senior fellow. The report said several for-profits have sought to become nonprofits to avoid federal regulations, some of which Shireman worked to create. By using public information requests, Shireman wrote case studies about the conversions of Herzing University, Remington Colleges Inc., Everglades College and the Center for Excellence in Higher Education (CEHE).

All four of the institutions signed contracts committing them to pay their former owners hundreds of millions of dollars, the report found, while those former owners remain involved in the governance of the nonprofits. For example, Keiser University told the IRS that neither its founder, Arthur Keiser, nor his family members would receive any "nonincidental private benefit attributable" to the newly nonprofit Everglades College. Yet in 2011 Everglades paid more than $34 million to entities owned by Keiser's family members.

Despite what Shireman called the "egregious" examples of covert for-profits, the IRS and the Education Department have failed to crack down. The reason, he said, is a regulatory blind spot where each agency assumes the other is doing the monitoring.

Laureate Education to Become Publicly Traded

Laureate Education on Friday announced plans to once again become a publicly traded company. Laureate is the largest U.S.-based for-profit college chain, with over one million students at 88 institutions in 28 countries. The privately held company was publicly traded before 2007, when a group of investors led by its CEO, Douglas L. Becker, bought Laureate in a deal valued at $3.8 billion.

The company also announced Friday that it has become a public benefit corporation. That switch means the company remains for-profit but legally is allowed to focus more on activities that aren’t related to boosting its profit margin. The process requires companies to alter their governance structures. Another for-profit chain, Rasmussen College, made the same change last year.

Becker explained the decision in a written statement:

“Most of our operations are outside of the United States, where there are many barriers that inhibit participation in higher education. We committed ourselves to overcoming these barriers in order to expand access. For a long time, we didn't have an easy way to explain the idea of a for-profit company with such a deep commitment to benefiting society. In 2010, we took notice when the first state in the U.S. passed legislation creating the concept of a public benefit corporation, a new type of for-profit corporation with an expressed commitment to creating a material, positive impact on society. Our public benefit is firmly rooted in our belief that when our students succeed, countries prosper and societies benefit.”

Florida Lawmaker, Employed by a For-Profit, Lobbied

Oscar Braynon II, a Florida state senator who is expected to become leader of the Senate Democrats next year, recently urged Florida’s Board of Physical Therapy to continue to allow colleges to operate unaccredited physical therapy programs, The Miami Herald reported. While some believe such programs lack appropriate oversight and may be of poor quality, Braynon spoke of the importance of preserving them.

While addressing the board, Braynon didn't reveal that he is senior vice president of government and senior relations at a for-profit college, the University of Southernmost Florida. And that college announced, shortly after Braynon's appearance before the physical therapy board, that it is launching a physical therapy assistant program that is just the kind of program Braynon was lobbying to preserve. Braynon told the newspaper that he was unaware of the college's plans to start the program.

Ad keywords: 

ITT Tech Faces Justice Department Inquiry

The U.S. Department of Justice is investigating whether ITT Educational Services defrauded the federal government, the company disclosed Monday.

ITT told investors that it had received a formal demand for information from the Justice Department, which is looking into whether the for-profit education giant violated the False Claims Act.

The inquiry is focused, the company said, on whether ITT “knowingly submitted false statements in violation of the Department of Education’s Program Participation Agreement regulations.” ITT said it believes the investigation centers around its compliance with Education Department rules on compensation.

The company added that it “believes that its practices with respect to compensation matters are in compliance with applicable laws and regulations, and is cooperating with the DOJ in responding to the [civil investigative demand].”

The Justice Department joins a growing list of federal and state authorities that are scrutinizing ITT. The company is fighting lawsuits from both the Consumer Financial Protection Bureau and the Securities and Exchange Commission, as well as facing heightened oversight from the Department of Education. More than a dozen state attorneys general are also investigating the company.

Ad keywords: 

Essay says data in White House Scorecard is lacking

As president of University of Phoenix, I am instinctively guided to support the principles of greater access to, and better analysis of, data and information. That holds particularly true in the case of data that can help prospective students make informed choices about higher education.

So the White House’s newly released College Scorecard -- and its attendant torrent of new data on colleges -- should be a welcome move. It purports to contain a variety of information that assesses institutions on important metrics, including graduation rates and the income of graduates.

It is no secret, however, that the Scorecard has attracted widespread criticism, not least from my colleagues at large public universities, whose concerns I share regarding broader methodological flaws in it -- particularly the failure to include data on students who did not receive Title IV funds (data currently unavailable to the department under federal law). And even the data about Title IV recipients presents major challenges. They paint a skewed view of graduation rates that I believe does a particular disservice to students and prospective working adult learners -- the very people this tool should help.

Just taking University of Phoenix as an example, there is much for which my university can be proud. The data released includes findings ranking it sixth in the nation amongst large, private institutions (more than 15,000 students) in terms of the income of its graduates (and 24th among all large institutions, public and private). This adds to our institution’s latest draft three-year cohort default rate of 13.6, which is comparable to the national average.

But consider the methodology behind the graduation rates that the Scorecard cites -- arguably the most problematic flaw underlying it. For years now the U.S. Department of Education has relied on Integrated Postsecondary Education Data System (IPEDS) graduation rates, which reflect only first-time, full-time undergraduate students. By any measure, the student population of America is more diverse than those who attend college full-time and complete it in a single shot. At the University of Phoenix, 60 percent of students in 2014 were first generation, and 76 percent were working -- 67 percent with dependents. These are the type of students labeled “nontraditional” by a Department of Education that has often talked of empowering them.

Yet for the purposes of the department’s graduation rates, these nontraditional students are effectively invisible, uncounted. In 2014, University of Phoenix’s institutional graduation rate for students with bachelor’s degrees was 42 percent. The department’s new Scorecard puts that figure at 20 percent. Our institutional rates demonstrate a higher rate of student success while IPEDS provides an incomplete picture of the university’s performance. In 2014, only 9.3 percent of my university’s students were first-time, full-time students as defined by IPEDS.

These graduation data would be troubling enough were it not for the fact that they are misinforming the same students that the Department of Education claims to be helping. For our graduates, the refusal to accurately calculate these data cheapens their legitimate and hard-earned academic achievements.

Reporting on the Scorecard, National Public Radio suggested that “what the government released … isn’t a scorecard at all -- it’s a data dump of epic proportions.” That is a correct assessment that speaks to the crux of the problem. More data, in this case, is not better. In open phone calls with reporters, department officials have acknowledged the limitations of their data, seemingly citing that very acknowledgment as license to publish them anyway. Yet no such acknowledgment is made clearly on the new Scorecard’s website, where students will access the information to make their decisions.

Now that the floodgate of institutional data has been opened, however, it is incumbent on all of us to improve it, contextualize it and help interpret it so prospective students can be appropriately informed by it. Responding to the Scorecard, the Association of Public and Land-grant Universities called for “Congress through the reauthorization of the Higher Education Act to support a student-level data system for persistence, transfer, graduation and employment/income information to provide more complete data for all institutions.”

The University of Phoenix has long supported these principles and objectives -- not just in pushing for more complete data but also in making clear that the standards must be applied to all institutions of higher learning. We agree with both Republicans and Democrats who want to see more audit-ready data for every college and university so as to validate and verify the foundational basis upon which the department creates and enforces regulations that should be applied to all higher education institutions (last year’s gainful employment rules among them). More can be done to guard against potential political motivations in the presentation of public data.

For our part, University of Phoenix is also clear that we must improve student outcomes, as we generally have year over year. From significant investment in our core campuses to ensuring that first-time undergraduates complete a pathway diagnostic before enrolling in their first credit-bearing course, we are engaged in the work that will help us to continue improving those outcomes and, more generally, to transform into a better, more trusted institution.

In the year I have been president, I have met with thousands of our students and graduates -- the men and women who are the face of that nontraditional category. These are people who are achieving great academic success despite the other demands that contemporary life imposes. They are driven, ambitious, determined and hardworking. And they leave me in no doubt of two things: their success deserves to be appropriately recognized, and their successors deserve better information in picking a college. We can all play a role in securing these basic goals.

Timothy P. Slottow is president of University of Phoenix.

Kentucky For-Profit Settles with Former Students

Daymar College has agreed to pay a $1.2 million settlement to former students who sued the Kentucky, for-profit company for false job placement claims and fraud, according to The Louisville Courier-Journal

The settlement requires Daymar to pay $1.4 million to Kentucky Attorney General Jack Conway's office. Students who attended the college in the five years ending July 27, 2011, would split the rest, while Conway's office will keep $200,000 to cover attorney's fees and to pay a claims administrator. The lawsuit had 413 private plaintiffs. 

In 2011, Conway charged the college with overcharging students for textbooks, misleading them about financial aid and failing to provide accurate information about the ability to transfer credit. 

Ad keywords: 

Purchase of Kaplan Campuses Finalized

Graham Holdings Company, which controls Kaplan Inc., announced Friday that the sale of its Kaplan Higher Education campuses to Education Corporation of America was completed Thursday, according to a corporate filing. ECA is a for-profit chain that announced in February it would purchase all 38 of the nationally accredited Kaplan campuses and related assets. Kaplan will continue to operate Kaplan University and eight professional schools.

Ad keywords: 

Sally Stroup to Leave For-Profit College Group

Sally Stroup will step down as executive vice president for government relations and legal counsel for the Association of Private Sector Colleges and Universities (APSCU), which is the for-profit industry's primary trade group. A spokesman for APSCU confirmed the group was "working on an appropriate transition" for the position.

Stroup is a veteran of higher education policy, having served in the U.S. Department of Education during the George W. Bush administration. She also spent 14 years on Capitol Hill, including an influential stint for the U.S. House of Representatives' Education and Workforce Committee in the 1990s. Between those chapters in her career, she worked for the Apollo Group, which owns the University of Phoenix.

APSCU is facing many of the same challenges as the sector it represents. Most of the publicly held chains have left the association during the last year. The group last month announced a restructuring, including a name change and return to focusing on its career-school roots.

ACLU May Sue Grand Canyon on Same-Sex Benefits

Grand Canyon University has received a letter from the Arizona branch of the American Civil Liberties Union about the for-profit institution's policy regarding employee benefits and same-sex spouses, according to a column in The Arizona Republic.

The university is a Christian-based institution. The letter from the ACLU Arizona legal director states, "On behalf of Grand Canyon University employees who have contacted our office about their denial of health insurance and other employee benefits based solely on their marriage to a person of the same sex … the denial of benefits to LGBT employees in same-sex marriages is in violation of federal law and severely harms those employees and their families."

The university is examining its policies.

"We are also proud of our record with regards to the diversity of both our student body and our employee base. To this point, like many employers, we have not provided marital benefits to same-sex partners. In light of recent Supreme Court and [Equal Employment Opportunity Commission] rulings, we are currently evaluating those policies as part of our plan," said Bob Romantic, executive director of GCU's communications office, in an email.

GCU has been exploring a change in its status to a nonprofit institution. Last year, the university's chief executive officer incorporated a nonprofit organization, dubbed Gazelle University. And last month, documents were filed with the Internal Revenue Service to allow Gazelle to acquire GCU's real estate, which would allow the university to make that transition.

Some nonprofit Christian colleges fear they may lose their tax-exempt status by refusing to extend benefits to employees in same-sex relationships, although many others do not expect such a challenge.

Ad keywords: 

Push to Protect Students at Unaccredited Law Schools

The State Bar of California is moving toward adopting a rule to require unaccredited law schools to disclose their dropout rates, The Los Angeles Times reported. California is one of a few states to allow graduates of unaccredited law schools to take the bar exam. The move to require more disclosure from the unaccredited law schools follows a report in the newspaper that about 90 percent of students leave before finishing their programs.

Ad keywords: 


Subscribe to RSS - forprofit
Back to Top