Support HR 2700, the For-Profit College Conversion and Accountability Act
Between January 2011 and August 2020, the Government Accountability Office (GAO) identified 59 for-profit college conversions. All but two of these instances involved the sale of the for-profit to a nonprofit entity, and nearly one-third involved college officials who had a leadership role at the nonprofit institution. The legislation establishes explicit eligibility requirements, requires the conversion be made public with proper advanced notice, prohibits the institution from marketing itself as a nonprofit until the conversion has been given final approval by the Department, and creates an office within the Department to determine the eligibility of the for-profit institution and monitor the conversion.
According to The Century Foundation, "Three core findings stand out in the new report. First, when ownership seeks to preserve some sort of insider role with the nonprofit school, conversions can become compromised, causing leadership and resources to be diverted from the college’s educational mission and instead steered into growing the former owner’s bank account. Of the nearly sixty conversions that GAO examined, insiders continued to play a role in the newly established nonprofit in roughly one-third. The GAO found that, among converted schools, those in which an insider continued to play a role account for the vast majority of federal aid, have worse financial performance, and risk improperly channeling profits to those insiders. Second, IRS tax-exempt status is wholly inadequate for assessing whether a school is actually nonprofit in the way it is operating. And third, neither the IRS nor the Department of Education are doing enough to address the problem."
In April 2021, Representative Lucy McBath (GA-06) introduced H.R. 2700, the For-Profit College Conversion Accountability Act with Representatives Sara Jacobs (CA-53) and Kathy Manning (NC-06). The bill would strengthen accountability measures at the Department of Education during the conversion or sale of a for-profit institution of higher education (IHE). NACAC supports this legislation and is working to encourage other members of Congress to support and/or cosponsor.