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August 12, 2016

Education Dept. Rejects Commercial College’s Nonprofit Bid

A higher-education company’s request to convert to nonprofit status was shot down Thursday by the U.S. Education Department, which called the shift an effort to avoid federal restrictions on commercial colleges, The Chronicle of Higher Education and The Wall Street Journal report.

The Center for Excellence in Higher Education, which operates institutions in Arizona, California, Colorado, and Utah is already nonprofit for tax purposes, but regulators said it cannot be considered such for education purposes because the colleges’ former owner, Carl Barney, remains a primary financial beneficiary of their tuition revenue.

For-profit colleges face stricter oversight of student outcomes than nonprofit institutions and are barred from deriving more than 90 percent of their income from Title IV federal student aid. The center was one of four entities named last year in a Century Foundation report as nonprofit higher-ed groups that behave like “covert for-profits.”

Education Secretary John King Jr. said the decision “should send a clear message to anyone who thinks converting to nonprofit status is a way to avoid oversight while hanging onto the financial benefits: Don’t waste your time.” Eric Juhlin, the college company’s CEO, said the department is “operating outside the law to advance a political bias.”