Department of Education Denies Utah For-Profit College’s Application for Nonprofit Status

A campus of Stevens-Henager College, part of the Center for Excellence in Higher Education
A campus of Stevens-Henager College, part of the Center for Excellence in Higher Education

U.S. Education Department denies a Utah-based for-profit college’s application to change its tax status.The U.S. Department of Education on Thursday denied a request by a Utah-based for-profit college chain to convert to nonprofit status for federal financial aid purposes.

The decision means the Center for Excellence in Higher Education, which operates four colleges in six states as well as an online degree program, will have to continue to meet financial aid and accountability rules targeted at for-profits. It also continues a trend in recent actions by the department to implement stronger consumer protections, many of them specifically aimed at for-profit institutions.

Converting to nonprofit status is attractive to those institutions because they would no longer face a federal requirement that at least 10 percent of their revenue come from sources other than Title IV federal student aid — such as loans and Pell Grants. Also, fewer of their degree programs would be subject to gainful employment regulations, which impose new standards for students’ success finding work and paying off student loans. Going the nonprofit route would also allow them to avoid the stigma increasingly associated with the for-profit sector.

“This should send a clear message to anyone who thinks converting to nonprofit status is a way to avoid oversight while hanging onto the financial benefits: don’t waste your time,” Education Secretary John King Jr. said in a statement.

Under King, the department has issued a number of decisions and new regulations that have drawn frequent complaints from the for-profit industry. Only a handful of for-profit institutions have pursued nonprofit status — Keiser University in Florida, Herzing University, Remington Colleges and now CEHE. Plans at Grand Canyon University to convert to nonprofit status were blocked by the institution’s accreditor earlier this year. And now the Center for Excellence in Higher Education has seen its efforts to convert to nonprofit status stymied by the Department of Education.

The letter from the department indicates that future applicants will have to demonstrate actual restructuring of the college’s operations.

Eric Juhlin, CEO of the Center for Excellence in Higher Education, called the department’s decision a “politicized attempt to smear our good colleges and our amazing students” and promised to appeal the denial.

“This decision, containing lie upon lie, is an example of a federal agency operating outside the law to advance a political bias,” he said in an unusually harshly worded statement.

Asked about Juhlin’s comments, a department spokeswoman, Dorie Turner Nolt, said, “The facts speak for themselves.”

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Source: Inside Higher Ed | Andrew Kreighbaum