The Future Tech Career Institute on South Michigan Avenue in Chicago stands accused of cheating students out of a promised education, which, unfortunately, is nothing new at for-profit colleges.
In less than six months last year, the Future Tech sales operation recruited more than 300 military veterans with federal benefits to spend, while its classes delivered little meaningful education, an Illinois Department of Veterans’ Affairs investigation found. Instead of each student earning as many as seven certifications apiece, as promised, only a few students earned even one certificate, the probe revealed. No one from the school responded to requests for comment.
For-profit colleges have become notorious for preying on veterans, single parents and other working adults who want only to better themselves. The U.S. Department of Education, which has a mixed record of regulating these operations, is moving slowly to implement another crackdown.
For-profit colleges are moving much faster to sidestep the regulators any way they can, including, in some recent cases, making an Orwellian switch to become nonprofits.
On the surface, turning a for-profit school into a nonprofit might sound like a positive. Get rid of the profit motive and there goes the financial incentive to cheat students, you might think.
Yet some for-profit colleges have taken to converting to nonprofits in name and tax status only, partly to evade the scrutiny the for-profit industry has brought upon itself. Unlike bona-fide nonprofits, some of the converts continue to be controlled by insiders who divert resources from educational purposes into their pockets, as outlined in an alarming report about so-called “conversions” from the Government Accountability Office.
This latest dodge is quite simple: An owner sells the school to a new, tax-exempt organization, receiving an IOU in exchange. The sales price is padded by inflating the value of the college brand name and other intangible assets, so the school owes the owner a fortune. The owner continues to profit off IOU repayments, management fees and other self-serving deals with the school. In its report, the GAO found that the Internal Revenue Service was approving many of these insider conversions without demanding accurate appraisals or doing other due diligence.
The incentive to con students remains in place and, as a nonprofit, the school may be eligible for additional government funding unavailable to for-profits. Taxpayers remain responsible for federally guaranteed loans made to the students, while the owners get a stream of income and a tax advantage.
If you’re wondering how such an abuse could be legal, well, it probably isn’t, but the watchdogs have been slow to bark. After decades of underfunding, the Internal Revenue Service is too strapped to effectively police these conversions. The Education Department similarly has rubber-stamped a bunch of them over the past decade, showing only a dim awareness of the stakes involved.
The result is more of the usual predatory sales tactics, worthless educational programs and taxpayers on the hook for defaulted loans.
Legislation aimed at stopping for-profit college scams has a hard time on Capitol Hill because the industry spreads around donations, especially to GOP lawmakers. Some Democrats, too, are reluctant to push reforms, as for-profit schools remain popular among constituents swayed by flashy sales pitches and unfamiliar with the advantages of community college and other more affordable alternatives. Not every for-profit school is bad, but students almost always have better options available.
The Education Department is mired in a complicated rule-making process, fighting old battles that should have been settled long ago. The bureaucrats need to get busy implementing overdue regulations to protect students and taxpayers. They must commit to rigorous oversight of for-profit conversions to nonprofit status, and Congress needs to be aware of industry efforts to gut those important reviews in the guise of reducing red tape.
The slow pace of reform has real-world consequences, as in the case of Future Tech, which targeted the Veteran Rapid Retraining Assistance Program enacted last year in the American Rescue Plan pandemic-aid package. Telling their marks that time was running out and the programs were filling up, the school’s sales team expanded its enrollment more than tenfold, while the school made practically no additional investment in teaching, investigators found.
Federal and state agencies caught up to Future Tech after students complained, and now U.S. Sen. Dick Durbin, D-Ill., has introduced legislation to restore the benefits of the veterans involved. That’s fine, as far as it goes, but more is needed to ensure vulnerable students get the education they deserve — and to protect taxpayers from getting soaked.
