Rep. Scott Demands Halt to For-Profit College Conversions to Non-Profit
Pushing forward with oversight of controversial conversions of for-profit colleges to non-profits, House Education and Labor Committee chair Bobby Scott (D-VA) has written to Secretary of Education Miguel Cardona, calling on the Department of Education and the Internal Revenue Service to “take steps to reform their processes and halt the approval of all conversions until they finalize those reforms.”
In a June 3 letter to Cardona posted on the committee’s website, Scott summarizes findings of a recent Government Accountability Office (GAO) report on college conversions, and an April 20 hearing the committee conducted on the subject. Scott concludes: “GAO’s findings indicate that lapses in Department oversight have allowed billions to flow annually to institutions it treats as non-profits, but which may operate as for-profits.”
Scott’s letter notes that at the April hearing, Republican members of the committee repeatedly insisted that the issue of college conversions was a waste of the committee’s time; they noted that such schools equalled 0.01% of all U.S. schools participating in the federal student aid program. But Scott points to research from the Century Foundation’s Yan Cao, who testified that day. Cao’s work shows that such converted schools account for about 25 percent of all student claims of institutional misbehavior. Scott called that statistic evidence of “concentrated malfeasance that needs further examination.”
Scott asked Cardona to provide additional information regarding college conversions, including (1) records of communications regarding the decision of Arthur Keiser, CEO of Keiser University, which converted to nonprofit on troubling terms, not to recuse from a 2018 discussion of the issue of conversions at NACIQI, a federal advisory committee that Keiser chairs; and (2) unredacted copies of all Department decisions regarding the change in ownership that resulted when ultra-rich Carl Barney sold his schools to a shell non-profit called the Center for Excellence in Higher Education (CEHE).
CEHE’s main school now, Independence University, is currently appealing a decision by its accreditor, ACCSC, to withdraw accreditation, which would mean an end to federal student aid. CEHE also is opposing a petition to the Department of Education filed by numerous organizations, and me, demanding that the Department end federal aid on the separate ground that the operation was found liable for deceiving students by a Colorado judge last year.
Numerous whistleblowers inside CEHE, including a new one this morning, have provided me with details about deceptive recruiting, shady financial aid practices, poor educational quality, and other abuses at the Barney schools.
Scott’s letter follows receipt of a May 27 report, obtained by Republic Report, from the Department to Congress, fulfilling the requirement in a 2020 spending bill that the Department explain its process for deciding on colleges’ applications to be recognized as a converting from for-profit to non-profit, a change in status that eases a school’s regulatory burden — and increases the possibility of abuses against students and taxpayers. Congress also directed that the Department provide a list of all schools that have sought to convert, and Department actions on those applications, in recent years.
Among other revelations, the new document from the Department appears to confirm a report published last year in the Chronicle of Higher Education that the CEHE schools (including Stevens-Henager, of which Independence University is part), which were denied non-profit status by the Department near the end of the Obama administration and then sued, settled the matter by obtaining non-profit status from Betsy DeVos but had to agree in return that Barney “would sever any financial ties [to the non-profit CEHE] by July 2019, and that he would no longer exert any control over the new nonprofit owner.” The new Department report says that DeVos’s approval was “granted as a result of changes to the relationship between the institution and its former proprietary owner (who was both lender and landlord).”
Eric Juhlin, who was CEHE’s CEO until the Department of Education in April suspended him from federal contracting, sent me a message on May 10 stating, “I can tell you that Carl Barney made no concession whatsoever as part of the Department’s decision in 2019 to issue new PPA’s for all of CEHE’s colleges to be rightfully recognized as nonprofit institutions. We dropped our lawsuit simply because the Department agreed to reverse an incorrect decision on the colleges classification.” It’s difficult to square Juhlin’s message with the Department’s new report.