If a For-Profit College Becomes a Non-Profit, Is That Good? Not Necessarily

Ann McClure's picture
Tuesday, February 12, 2013

In the past two years, as the public has come to recognize that many for-profit colleges have been ripping off taxpayers and ruining students' lives, enrollments have declined, and the once-mighty industry has gone into a tailspin. A number of schools, such as American Career Institute and ATI have abruptly shut down many or all of their campuses, leaving students out in the cold, their futures uncertain. The biggest companies in the sector, including the University of Phoenix, Career Education Corp., EDMC, Corinthian Colleges, and Washington Post-owned Kaplan, have downsized as their revenues and share prices have sharply plummeted.

Now, a small but increasing number of schools are pursuing a new survival strategy: transforming their for-profit institutions into more traditional non-profit schools. Indeed, at its last annual convention, held in Las Vegas, the industry's trade association, APSCU, offered a presentation (pdf) by lawyers about just how to make such a conversion, as well as the pros and cons of doing so. But there are potential dangers to the public when one of today's for-profit schools becomes a non-profit.

It's easy to see why some for-profit college owners now might want to take their institutions non-profit -- to escape the bad reputation of their sector; to become eligible for private, tax-deductible donations and more state grants; to enjoy tax-free status; and, perhaps above all, to avoid strengthened federal and state regulations aimed at preventing for-profit college abuses.

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