Over the past decade, abuses by colleges operating in the for-profit education sector have been well documented.1 Buoyed by a tide of government-enabled financing, these for-profit colleges expanded their enrollment from 1990 to 2013 more than ten times faster than did nonprofit or public schools,2 and they widely engaged in aggressive and misleading recruitment and other predatory practices3—all to fill programs that had abysmally low completion and job placement rates. Many students that had enrolled in for-profit colleges were left with huge student loan debts and little else to show for their education investment. Meanwhile, taxpayers shelled out billions of dollars in financing and tax breaks for these schools, with little accountability
…show more content…
High-profit, high-enrollment schools such as ITT Tech, DeVry, and the University of Phoenix are allowed to continue to participate in the federal loan program, but under even stricter rules.4
Recently, a new trend in the abuse of college students and federal education dollars may be under way: the creation of the covert for-profit. The owners of some for-profit institutions have sought to switch their schools to nonprofit status, freeing them from the regulatory burdens of for-profit colleges, while continuing to reap the personal financial benefits of for-profit ownership.
Prompted by news of several recent conversions of for-profit colleges into nonprofits, The Century Foundation has obtained IRS and U.S. Department of Education records and communications that call into question the legitimacy of some of these conversions. Through four case studies, based on hundreds of pages of documents obtained from government agencies, the examination reveals a dangerous regulatory blind spot, with the two federal agencies each assuming, wrongly, that the other is monitoring the integrity of the “nonprofit” claims of these …show more content…
Many nonprofits, for example, involve vast numbers of people who work for free as volunteers, a practice that is highly restricted in the for-profit environment. Imagine a supermarket or snack food chain enlisting two million underage girls to sell cookies: the operation would be shut down and the companies would be prosecuted. Yet the nonprofit Girl Scouts do exactly that every year, selling 175 million overpriced cookies baked by for-profit contractor bakeries. This “child labor” is not illegal because the Girl Scouts councils are nonprofit: their unpaid boards are trusted to engage in this cookie selling, which they believe benefits the girls and is consistent with the values of the organization. Compared to the supermarket owner or cookie baker, the Girl Scout councils are far more likely to make decisions that truly benefit the girls—because council members do not have a personal financial interest. They are not allowed to keep the money for
High-profit, high-enrollment schools such as ITT Tech, DeVry, and the University of Phoenix are allowed to continue to participate in the federal loan program, but under even stricter rules.4
Recently, a new trend in the abuse of college students and federal education dollars may be under way: the creation of the covert for-profit. The owners of some for-profit institutions have sought to switch their schools to nonprofit status, freeing them from the regulatory burdens of for-profit colleges, while continuing to reap the personal financial benefits of for-profit ownership.
Prompted by news of several recent conversions of for-profit colleges into nonprofits, The Century Foundation has obtained IRS and U.S. Department of Education records and communications that call into question the legitimacy of some of these conversions. Through four case studies, based on hundreds of pages of documents obtained from government agencies, the examination reveals a dangerous regulatory blind spot, with the two federal agencies each assuming, wrongly, that the other is monitoring the integrity of the “nonprofit” claims of these …show more content…
Many nonprofits, for example, involve vast numbers of people who work for free as volunteers, a practice that is highly restricted in the for-profit environment. Imagine a supermarket or snack food chain enlisting two million underage girls to sell cookies: the operation would be shut down and the companies would be prosecuted. Yet the nonprofit Girl Scouts do exactly that every year, selling 175 million overpriced cookies baked by for-profit contractor bakeries. This “child labor” is not illegal because the Girl Scouts councils are nonprofit: their unpaid boards are trusted to engage in this cookie selling, which they believe benefits the girls and is consistent with the values of the organization. Compared to the supermarket owner or cookie baker, the Girl Scout councils are far more likely to make decisions that truly benefit the girls—because council members do not have a personal financial interest. They are not allowed to keep the money for