The NY Times has a disturbing article on a scam being run by “non profit” universities.
The scam is pretty simple and has three parts.
1. Non profits escape scrutiny. The federal government has focused on false promises that for profit schools make to train a student to get a job. Huge numbers of these promises are never fulfilled, leaving the students heavily in debt to their school. The feds have caused a number of these private diploma mills to close. However, “non profit” schools have escaped this scrutiny.
2. Non profits CAN make money! Non profit only means that the institution can not make a profit. However, moneys invested in the enterprise as well as investments in growth of endowment are not considered profit. Harvard, for example, has accumulated an endowment estimated at close to 40 billion dollars ..all of which is tax free!
3. Non profits can enrich their donors. In one examples given in the Times, a profit making college, “Keiser University” converted itself to non profit with its founder as President. The President gives himself a salary on nearly $900,000 a year and Arthur Keiser authorized the University to pay interest on almost $400 million in loans securitized by some land and by the University’s good reputation.
This is not at all the end of the potential for profit from a supposedly “non profit.” Donations to Keiser, unlike investments when it was a profit making institution, qualify as a charitable tax deduction, even though these “donations” increase the schools ability to pay Dr. Keiser and his family as officers of the University and as holders of loans to the University.
Nor is the magic of “non profit” news to readers of THE-Ave.US. Western Governors University was established as a non profit while paying its founder, Robert Mendenhall a salary of about a million dollars as President of WGU. (Dr. Mendenhall, by the way, was given his doctorate for the process of creating WGU!) Last time I reviewed WGU, the school took pride in offering only pass fail courses (what it calls competency), using coaches to help students pass tests and not using faculty to teach even difficult subjects like science.
Dr. Mendenhall, meanwhile, sits on the boards of the same companies that provide WGU with the online teaching materials and tests it sells to its students. Of course WGU, like its private cousins, did not disclose the success rate of its graduates.