Federal bill would attempt to speed for-profit conversions to nonprofit colleges

Higher Ed Dive 

Natalie Schwartz

March 11, 2022

Dive Brief: 

• Federal lawmakers proposed a new bill this week meant to speed the conversion of for-profit colleges to nonprofit institutions when they are bought by new owners.

• The proposal — from Rep. Fred Keller, a Pennsylvania Republican — would require the U.S. Department of Education to greenlight such conversions after they close if they meet certain criteria. These include approval of a “materially complete” pretransaction review application by the department within 90 days before the deal closes. It would also mandate that colleges pay an administrative fee of up to $120,000 to the agency when applying for such conversions to cover the costs of those reviews.

• But one policy expert said the bill would do more harm than good. “The bill would prevent the department from doing the kinds of rigorous reviews that they have done under both Democratic and Republican administrations,” said Robert Shireman, a senior fellow at The Century Foundation, a left-leaning think tank.

Dive Insight: 

A spate of for-profit colleges switching to nonprofits under new owners has caught the attention of federal lawmakers and policy advocates, who worry that these transactions are rife with conflicts of interest and allow proprietary schools to dodge regulations affecting the sector.

A report last year from the U.S. Government Accountability Office heightened those concerns.

It looked into 59 nonprofit conversions between January 2011 and August 2020. In about one-third of those transactions, for-profit college officials were insiders to the conversion, meaning they had a relationship with the institution’s buyer that could influence its financial decisions.

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