A previous APC blog highlighted some prudent predictions, offered by Inside Higher Ed’s Senior Reporter Paul Fain, wherein he considered the possibility that proprietary colleges may begin changing their tax status to become non-profit organizations for a variety of reasons. Avoiding the impact of the pending GE regulation would potentially be one of them.

In early January, in a move that likely came as little surprise to those familiar with the nuances of higher education regulation, Milwaukee-based Herzing University announced that it has become the latest institution to make the transition to nonprofit status. Though Herzing’s administration has not expressly outlined its motives for the change, reporters have speculated that it represents a desire to evade punitive regulatory oversight at the state and federal level — indeed, Herzing staff previously filed comments with the Department of Education that spoke to the “devastating impact” the Gainful Employment rule would have on underserved student populations.

The environment in which proprietary colleges now operate is undeniably challenging: with many media outlets jumping on the bandwagon, the sector has met with sensationalist and derogatory reporting to the extent that the term “for-profit” is equated in the minds of some less-enlightened as “anti-student.” That undeserved stigma does a disservice to the staff at many credible institutions, who invest significant time and resources to ensure that students receive an excellent return on their tuition dollars. But more so than that, it also overlooks the hard work and passion of the innumerable students that attend these programs and graduate with the right education and right learning experiences to launch a rewarding career or go farther in the one they’ve started.

The arbitrary Gainful Employment rule, which focuses solely on proprietary colleges, has left many institutions facing poignant questions about how best to continue serving their students. As evidenced by Herzing’s recent decision, where it was noted that there would be “no material changes to its senior administration, faculty, staff, programs or services to students”, it’s highly possible that an alteration of tax status is now the most desirable, and viable, option for institutions wishing to remain buoyant. Again we must ask the question: how is this helping? As we noted last time we blogged on this issue:

The article demonstrates a fundamental paradox of the Gainful Employment rule: it all comes down to tax status. An institution with degree programs that may not pass the regulation today as a proprietary college would not be subject to the regulation as a non-profit institution. Same exact institution, same exact degree programs, same exact debt-to-earnings rate and program cohort default rate…but very different regulatory realities.

While we cannot comment on the institutional practices at Herzing, and have no reason to believe that those practices would not pass muster under GE, the fact that it is possible for a postsecondary institution to avoid federal oversight and repercussions for its degree programs simply because it is “nonprofit” merely underscores the folly of the GR rule, and how it fails to meets its purported goals.

We only hope that the Department will take notice and seek to work on accountability measures that are fair, and encourage positive outcomes for students across all sectors of higher education. As Herzing’s president once said of GE: “I just want to be held to the same standards as the nursing program down the street.”

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