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DeVry University was once among the largest for-profit institutions in the country and the crown jewel in its parent company’s collection.

But enrollments have fallen and the for-profit institution has seen multiple lawsuits over advertising, recruitment and job placement.

Now DeVry’s parent company -- Adtalem Global Education Inc. -- is transferring ownership of the institution, along with Keller Graduate School of Management, to Cogswell Education LLC. DeVry and Keller together enroll nearly 30,000 students. Cogswell is the owner of Cogswell College, a California-based private for-profit institution of about 600 students, that specializes in art, game design, music and software engineering.

No money is changing hands in the deal, which still requires regulatory and accreditor approval.

Both critics and advocates of for-profit colleges say Adtalem management had been signaling for at least a year that the company wanted to divest DeVry.

“Given that the asset is at break-even and declining, selling for zero is also not surprising,” said Trace Urdan, managing director at Tyton Partners and a longtime analyst of the for-profit sector, via email. “If the alternative is an expensive teach-out, then simply getting it off the books is a win.”

The transfer agreement includes a provision that Adtalem could earn up to $20 million over 10 years if DeVry’s cash flow maintains certain levels.

The move continues a shift in for-profit institutions moving from publicly traded status to a different or private status. A nonprofit missionary organization, the Dream Center, is purchasing Education Management Corp., and Purdue University is acquiring Kaplan University in an effort to create a new nonprofit online university.

"We’re seeing the large publicly traded for-profit colleges change their image over the last few years in some way or another,” said Tariq Habash, a policy associate at the Century Foundation.

But there are conditions to the deal that give Adtalem and Cogswell a way out of the agreement. For instance, Adtalem faces financial penalities if enrollment decreases. One condition calls for a minimum enrollment of 22,059 in May 2018. Cogswell can cancel the agreement if enrollments fall 1,500 students short of that target. DeVry's enrollment has fallen 21.4 percent year over year, to 19,287 as of September. Keller enrolls nearly 8,000 students.

Cogswell can also cancel the agreement if the number of borrower-defense claims against DeVry exceeds 2,250. Borrower-defense claims are applications for loan relief from students who state they have been defrauded or misled by their college. According to a November report from the Century Foundation, Adtalem had more than 1,900 claims against the company, of which about 1,600 were from DeVry alone, said Habash, who co-authored the report. The number of borrower-defense claims across all institutions has been growing in recent months, and it’s possible that more claims have been launched against DeVry, he said.

“There has been a lot of scrutiny on DeVry,” Habash said. “They’ve been under a microscope. Adtalem has been under a microscope and [the conditions] might be Cogswell’s way of ensuring if something new comes out buzzing in the public eye, they have an opportunity not to be stuck in the contract.”

Cogswell College officials said they had planned to issue a statement, but they did not provide one in time for publication.

Last year Adtalem settled lawsuits with both the Federal Trade Commission and the Education Department over job-placement claims at DeVry. Adtalem was formerly DeVry Education Group before the name was changed earlier this year.

“DeVry had made some important commitments to consumer protection, promising not to restrict students’ legal rights and to assure market accountability,” said Robert Shireman, a senior fellow at the Century Foundation and critic of the for-profit college sector, in an email, referring to Adtalem management’s decision last year to voluntarily end forced arbitration agreements and lower the maximum threshold of revenue they received from federal financial aid from 90 percent to 85 percent, including military and veterans’ benefits. “This sale, so soon after those commitments were made, raises questions about the staying power of promises by any other for-profit school.”

Last year Adtalem announced that its institutions would make a set of commitments to students on issues of recruitment, enrollment, student outcomes and informed student choice.

“DeVry and Keller were, in essence, a distressed asset while the bulk of their other properties have been performing well,” said Jeff Silber, an education financial analyst with BMO Capital Markets, in an email. “While it’s still a bit shocking to think that DeVry itself will no longer be part of a publicly held entity, unfortunately, the institution had been underperforming for some time.”

Lisa Wardell, president and chief executive officer of Adtalem, said in a statement that the company would work closely with Cogswell Education to ensure a smooth transition for DeVry.

“Adtalem will now have more ability to focus on its remaining institutions across our three key verticals: medical and health care, technology and business, and professional education,” she said.

Adtalem maintains ownership of Carrington College, Chamberlain University, American University of the Caribbean, Becker Professional Education, Ross University School of Medicine and Ross University School of Veterinary Medicine.

For-profit observers admitted not knowing much about the private company that is looking to own DeVry.

“Given the relatively small size of the buyer,” the deal isn’t something that former education secretaries in the Obama administration would likely have approved, Urdan said, but he believes it’ll be interesting to see what the accreditors think of the transaction.

Habash said Cogswell operates schools with fewer than 1,000 students, which should raise red flags -- and that any institution that grows overnight by a factor of 50 should be looked at closely by the department and accreditors.

“It’s definitely not a done deal,” he said.

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