January 27, 2021

Government Accountability Office Report Requested by Senators Hassan, Murray, Durbin & Representative Scott Highlights Need for Better Oversight of For-Profit College Conversions

Approximately One-Third of For-Profit to Nonprofit College Conversions Involve Insiders

WASHINGTON – U.S. Senators Maggie Hassan (D-NH), Patty Murray (D-WA), Dick Durbin (D-IL) and Representative Bobby Scott (VA-3) announced today the release of a Government Accountability Office report that they requested into for-profit college conversions – the process used by some for-profit colleges to become nonprofit, changing both their tax filing status and level of higher education accountability requirements applied to the institution.

 

You can read the report here.

 

The report highlights significant concerns with insider involvement in for-profit conversions, including that:

  • Approximately one of three for-profit college conversions involved insiders
  • Insider conversions account for the vast majority of federal student aid
  • Insider conversions have worse financial performance
  • Many of the insider conversion institutions engage in deceptive marketing practices

 

The Government Accountability Office recommended that the Internal Revenue Service strengthen its process for reviewing for-profit conversion applications. It also recommended that the Department of Education provide better oversight after a conversion occurs, which is part of Senator Hassan and Durbin’s PROTECT Students Act.

 

“This report highlights what we long suspected – that many for-profit college leaders turn their institutions into nonprofits in order to skirt oversight measures while still reaping their own personal financial benefits. And most troubling is that students are the ones who lose here, enrolling in a college that may not perform as well or deceptively markets as a nonprofit,” said Senator Hassan. “I have long worked to help hold for-profit colleges accountable so that students can receive a high-quality education. I look forward to working in Congress and with the Biden administration to strengthen for-profit college oversight, including during and after any conversions.”

 

“This report makes clear that for too many for-profit colleges, making the transition to non-profit status isn’t about what’s in the best interest of students—it’s about lining the pockets of wealthy executives,” said Senator Murray, incoming Chair of the Senate Health, Education, Labor, and Pensions Committee. “Every student deserves a quality education from schools committed to serving them—not well-connected insiders. We’ve got a lot more work to do to ensure that colleges are held accountable and to protect students from fraud and abuse—so I absolutely encourage the Department of Education and the IRS to swiftly act on the GAO’s recommendations.”

 

“This report confirms what we have long known: that for-profit colleges are gaming the system and our federal government is not adequately protecting students and taxpayers. I stand ready to work with the Biden Administration to address the shortcomings identified in this report and enact new measures like the PROTECT Students Act,” said Senator Durbin.

 

“Predatory, for-profit colleges should not be able to evade accountability by simply converting to a non-profit school,” said Education and Labor Committee Chairman Robert C. “Bobby” Scott. “Today’s GAO report confirms the need for stronger federal oversight to protect students and taxpayers from the abuse of for-profit to non-profit conversions. My Committee will continue to investigate this practice and looks forward to working with the Biden administration to crackdown on predatory schools and put students first.”

 

“The GAO report sounds the alarm on suspect and shady for-profit college conversions—a trend that The Century Foundation has been raising concerns about for years. Most notably, the comprehensive study reveals that when insiders are involved in the deal, it greatly increases the risk that the new nonprofit school will divert resources away from the college’s educational mission, to the detriment of students, and toward the former owner’s bank account. Second, neither the IRS nor the Department of Education is doing enough to address this growing problem. These findings should spark action: We need greater oversight to ensure that de-facto for-profit schools and their owners don’t get away with misleading students and dodging regulations,” said Robert Shireman, director of higher education excellence and senior fellow at The Century Foundation.

 

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