It’s an issue we have touched on time and again: the paradoxical nature of the Gainful Employment Rule, which, as a recent New York Times article (“Some Owners of Private Colleges Turn a Tidy Profit by Going Nonprofit“) reminded us, ultimately comes down to tax status.

After all, non-profit colleges are barley beholden to the GE Rule and virtually every GE program at community colleges avoids the rule even when there is clear objective evidence that program outcomes at many of these institutions are weak and their student borrowers are struggling.

The Times‘ article examines Florida-based Keiser University’s transition from a privately held for-profit college to a non-profit institution in 2011, noting concern among consumer advocates and legal experts that for-profit colleges are changing their tax status in an attempt to avoid heightened government scrutiny and regulation on the proprietary college sector.

This isn’t the first time such a concern has been raised. Indeed, Milwaukee-based Herzing University came under question when it announced this past January that it changed over to non-profit. And, in July 2014 – several months before the Department of Education announced its final Gainful Employment rule – Inside Higher Ed Senior Reporter Paul Fain wrote about the possibility that privately held for-profits could consider changing their tax status to become non-profit organizations.

But, regardless of the motivations of Keiser University – and other formerly for-profit institutions (such as Stevens-Henager College and Remington College) – to convert to non-profit status, the possibility that a for-profit college can, in fact, avoid federal oversight and repercussions for its degree programs simply by changing its tax status and becoming non-profit underscores the utter folly and fundamental paradox of the GE rule.

As we noted in a previous post on this particular topic:

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.

How is this sound policy? All colleges across all sectors should be held to the same standards in order to ensure optimum outcomes and maximize the return on investment for their students. Only then would the GE Rule be unbiased in its design and application. Only then would the best interests of the very students the DOE asserts it is trying to serve be, in fact, served.

We welcome additional comment on this issue and continue to encourage others to fight for a regulation that is fair, rational and universally applied to all colleges, regardless of their tax status.

Leave a Comment

Your email address will not be published. Required fields are marked *