May 24, 2018

The Defining Higher Ed Abuse of the DeVos Era

The Defining Higher Ed Abuse of the DeVos Era

Troubling conversions of predatory for-profit colleges into corrupted non-profits benefit wealthy insiders — and harm students and taxpayers

Below are comments I plan to deliver today to the U.S. Department of Education’s National Advisory Committee on Institutional Quality and Integrity (NACIQI). 

Members of the committee, good morning.

Mr. Gunderson and Carl Barney, Mr. Juhlin’s boss, have in the past charged critics with waging ideological war on for-profit schools. I don’t know what ideology they were talking about, other than opposition to waste, fraud, and abuse. But they implied we think everything should be non-profit. Secretary DeVos has echoed that message, saying it’s unfair to judge schools based on their tax status.

I agree with the Secretary. We can’t measure schools based simply on whether they are for-profit or non-profit. That’s not determinative of integrity or quality.

Some predatory schools have long been non-profit, like Wright Career College, shut down amid charges of fraud, or Center for Employment Training’s Chicago campus, whose director has been indicted.

But today many of the most troubling non-profits are those recently converted from for-profit. Many deals appear structured to benefit not primarily students, but instead insiders — at Kaplan-Purdue, Bridgepoint, Keiser, Ultimate Medical.

The other side of this coin is further abuse of students and taxpayers. Many converted schools are using their non-profit status as a shield to exempt them from laws to curb for-profit abuse. The conversions also free schools of the stigma their own bad behavior helped create.

The result is that predatory schools can deepen their abuses. Last week I published an article about the new non-profit Dream Center Education Holdings, which has taken over the EDMC schools and is run by Brent Richardson, formerly Grand Canyon’s CEO. The new enterprise seems to be trying to leverage its non-profit assets to benefit a network of for-profit companies run by Richardson, his family members, and associates.

Staff say ethics and compliance are worse than under the for-profit owners. There’s heightened pressure to enroll students at all costs. The company seems to be misrepresenting the accreditation status of some campuses, and evading compliance with regulations.

Schools driven by numbers act recklessly if no one is holding them accountable.

In 2016, the Department did send a message, rejecting the bogus conversion of Mr. Barney’s schools. Unfortunately, the DeVos Department has demonstrated by word and deed that it’s not concerned about predatory abuses.

Accreditors pick up this signal. In 2016, the Higher Learning Commission rejected the conversion of Grand Canyon into a cozy pair of entities, for-profit and non-profit. In 2018, HLC approved the same deal.

The fact that the DeVos Department and the IRS have abdicated oversight does not prevent you from acting. Indeed you have a duty.  For-profit conversion has became the defining higher ed abuse of the DeVos era, and it’s happening right in front of you. Accreditors can curb the practice of corrupted non-profits. If they don’t, you should curb the accreditors.