Elizabeth Warren And Bernie Sanders Urge IRS To Scrutinize For-Profit Colleges

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Rob Shimshock Education Reporter
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Democratic Sen. Elizabeth Warren and other senators are urging the IRS to “closely scrutinize” for-profit colleges that are trying to become nonprofit institutions, according to an April letter the senators sent to the government agency.

Warren, of Massachusetts, along with Independent Sen. Bernie Sanders of Vermont, Democratic Sen. Kamala Harris of California, and eight other senators described a “recent and troubl[ing] trend” of for-profit universities attempting to become tax-exempt nonprofit entities to enrich themselves, in the letter obtained by The Daily Caller News Foundation.

The senators cite a Code Section 501(c)(3) provision allowing organizations to exempt themselves from federal income tax if they are “organized and operated exclusively” for educational ends, but forbids private shareholders from reaping the benefits of the organization’s net earnings.

“It is critical that tax-exempt higher education institutions’ income, revenue, and assets do not personally enrich executives, administrators, board members, officers, or other institutional insiders at the expense of the students served,” wrote Warren, Sanders, and the others.

Nonprofit Purdue University’s acquisition of for-profit Kaplan University is one source of skepticism for the senators, who believe that Purdue cannot account for the academic utilities of the university without impacting the school’s financial elements, which Purdue has placed under the control of Kaplan’s restructured former holding company.

The senators also express concern that Grand Canyon University and Ashford University are maneuvering to boost their own wallets at the expense of customers and taxpayers.

“They’re concerned that the for-profit owners will receive some profit from the transfer of assets,” a senior private college official with more than 50 years in the private education sector told TheDCNF. “They don’t believe in the free enterprise system.”

The official reported that his private university, which recently transitioned from a for-profit school to a nonprofit institution, charged $12,000 per year in tuition but obtained a similar graduation rate as a school that charged $18,000 per year in tuition.

“By going nonprofit, some students in some states are eligible for state grants which really reduces their costs,” he explained to TheDCNF, but noted that bad press leads some prospective students to question whether they want to work for for-profit schools.

The private education veteran stressed the extensive process his institution underwent to become a nonprofit. The school spent two years getting accredited and three years gaining the approval of the Department of Education. He suggested that while the IRS approved his institution for nonprofit status in eight months in accordance with the law, the department “looked at the feelings and political orientation” of the matter and stonewalled the university for a period of time.

“There are laws against monopolies ion the private sector and for good reason,” the official said, comparing it to competition in the education industry.

Trends in higher education do not reflect a blossoming industry of public universities churning out more and more liberal arts graduates. The University of Wisconsin at Stevens Point is considering eliminating degrees in the humanities and funneling the funding into fields like chemical engineering and graphic design.

Pittsburgh high school student Raelee Nicholson, a high-performer whose guidance counselor encouraged her to go to college, instead wishes to enlist in a two-year technical program to become a certified diesel mechanic, reported The Wall Street Journal. Georgetown University Center on Education and the Workforce director Tony Carnevale told WSJ that one-third of students who graduate from a four-year college do not end up taking jobs that require a four-year degree.

“Diesel mechanics charge $80 an hour,” Nicholson explained.

The Association for Career and Technical Education reported that 49 states instituted 241 policies to bolster career and technical courses in high schools.

TheDCNF reached out to the IRS and Department of the Treasury for comment but received none in time for press.

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