education's digital future

Some owners of private colleges turn a tidy profit by going nonprofit

After a recent government crackdown on the multibillion-dollar career-training industry, stricter limits on student aid and devastating publicity about students hobbled by debt and useless credentials, some for-profit schools simply shut down.

But a few others have moved to drop out of the for-profit business altogether, in favor of a more traditional approach to running a higher education institution.

And the nonprofit sector, it turns out, can still be quite profitable.

Consider Keiser University in Florida. In 2011, the Keiser family, the school’s founder and owner, sold it to a tiny nonprofit called Everglades College, which it had created.

As president of Everglades, Arthur Keiser earned a salary of nearly $856,000, more than his counterpart at Harvard, according to the college’s 2012 tax return, the most recent publicly available. He is receiving payments and interest on more than $321 million he lent the tax-exempt nonprofit so that it could buy his university.

And he has an ownership interest in properties that the college pays $14.6 million in rent for, as well as a stake in the charter airplane that the college’s managers fly in and the Holiday Inn where its employees stay, the returns show. A family member also has an ownership interest in the computer company the college uses.

Keiser University, which has about 20,000 students spread over 15 campuses, is one of a handful of for-profit colleges that have switched to the nonprofit arena or are considering that move.

The shift means more restrictions on moneymaking ventures and loss of ownership. But nonprofit schools — defined as providing a public benefit — do not have to pay taxes, are eligible for certain state grants and can receive more money from the federal student loan program.

Consumer advocates and legal experts warn that some institutions might be shifting primarily to avoid stepped-up government scrutiny and regulation. Moreover, said Lloyd Mayer, an associate dean and law professor at Notre Dame Law School: “There is a concern that the now-nonprofit colleges may be providing an impermissible private benefit to their former owners. These sorts of arrangements raise yellow flags.”

Dr. Keiser, who started Keiser University in 1977 with his mother, Evelyn, now 91, scoffed at such criticism. “My goal has been to build a family legacy,” he said. Becoming a nonprofit “was a natural transition for us,” and “for our students, too,” he said, allowing the institution to expand into a residential college.

He said that the family had long planned the move to the nonprofit sector, laying the groundwork in 1998, when it first bought a small Florida college and later converted it to the nonprofit Everglades. Keiser now offers 100 degrees and certificates in subjects that include baking and pastry arts, nursing and political science.

As for any financial conflicts of interest, he said: “We disclosed everything. There’s nothing wrong with it.”

Dr. Keiser, who is the House Republicans’ appointee to the Education Department panel that oversees accreditation, formerly was chairman of the governing board of the Association of Private Sector Colleges and Universities, which filed a lawsuit in November challenging new federal regulations. These require for-profit colleges and trade schools to show that their students will eventually earn enough money to pay their student loans....

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