Rimon Partner Stephen Trachtenberg talks to eCampus News about for-profit schools converting to nonprofits
News Stephen Joel Trachtenberg · April 16, 2015
Rimon's Stephen Trachtenberg, the President Emeritus of George Washington University, tells eCampus News that many for profit schools are converting to nonprofits to evade the rigorous scrutiny of the for-profit sector because if they go nonprofit, they’ll be treated more benignly. According to Trachtenberg, “It’s perfectly legal, but if I were a regulator for the government, I’d want to be sure transactions were transparent, with negotiations at arms-length.”
“What happens if you follow the money?” Trachtenberg questioned. “If you follow it, it turns out [previous for-profit owners] own a for-profit school now sold as a nonprofit. They’re paid as well or better, can get rent, provide goods and services…they have their hands in everything.”
“Say a previous owner of the for-profit school owns a building, but the school is not-for-profit now,” continued Trachtenberg. “They can still rent it out to the new school, they might have a stake in the cafeteria or other operations too, and they can still get a good salary. Switching might turn out to be a smart move from their perspective."
“Conversion may well not change anything for students,” Trachtenberg said. “So long as the main goal of an institution, regardless of its format, has been putting its money back to improving the experience of the student, there need not be any noticeable difference for the student.”
“The real test that regulatory agencies have to see is whether or not the student is being served – regardless of the format,” Trachtenberg concluded.