Education Dept. Sued Over Nonprofit Conversion

September 1, 2016

The Center for Excellence in Higher Education, a chain of for-profit colleges, is suing the Department of Education after it was blocked from converting to nonprofit status. 

The Utah-based organization alleges in a lawsuit filed in federal district court that it was the victim of a political agenda and that the department's decision was arbitrary, capricious and inconsistent with precedent.

Converting to nonprofit status would free the chain of having to comply with the so-called 90-10 rule -- which dictates that for-profits can take in no more than 90 percent of revenue from Title IV federal student aid -- as well as new gainful employment regulations targeted at the for-profit sector. The New York Times first reported the lawsuit. 

In announcing the decision to block the nonprofit conversion in August, Education Secretary John King said the decision should serve as a warning to other for-profits looking to dodge oversight by switching tax status. 

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