On Sept. 28, the nonprofit Veterans Education Success sent a petition to the Federal Trade Commission asking them to investigate Ashford University, a for-profit college. For-profit colleges, like Ashford, often pursue GI Bill funds because of the 90/10 rule, a regulation that requires them to get 10% of their funds from sources outside of federal financial aid, and because of a loophole, GI Bill money doesn’t count.
The memo pointed to accounts from faculty who described poor-quality educational practices – like passing students who hadn’t mastered the material or assigning professors to courses outside their expertise – and enrollment officers who reported pressures to falsely advertise to students. It quotes one employee, Eric Dean, who told NBC News that he was instructed to enroll veterans for at least three weeks so they wouldn’t be eligible for a refund.
Two months later, the University of Arizona formally bought the for-profit college for $1, converting it into a nonprofit. That meant it was no longer under the jurisdiction of the Federal Trade Commission and unlikely to be investigated for possible violations of consumer protections.
“This was really personal for us,” said Aniela Szymanski, senior director for legal affairs and military policy at Veterans Education Success. The incentive for schools like Ashford to convert is to avoid regulations – like the 90/10 rule which prevents them from getting all of their revenue from federal funding like financial aid – or “they’ve gotten such a bad reputation from the abuses that they’ve engaged in in the industry that they want to rebrand themselves.”
The trend of for-profit colleges converting to nonprofits has been in the spotlight recently after a January report from the Government Accountability Office (GAO). It examined 59 schools that underwent this change since 2011, most of which involved a sale to a nonprofit organization. It points to warning signs that that schools may be dodging regulations but not necessarily operating with a less predatory model when they shed their nonprofit status.
When a school starts with a for-profit mindset – which incentivizes upping tuition costs and lowering expenses for education – “it shapes the behavior of the school after the conversion,” said Yan Cao, a fellow at the Century Foundation, a progressive thinktank. She co-authored an explanatory piece on the GAO report.
The report particularly explores insider-driven conversions, which made up a third of cases, where the leader of a forprofit college also leads the nonprofit that buys the school, a different scenario than what happened with Ashford, but similarly concerning to higher education policy experts.
