Bryant & Stratton Pursues Nonprofit Conversion

Bryant & Stratton College, a private for-profit institution based in Buffalo., N.Y., plans to convert to a nonprofit, the college confirmed Thursday.

The college’s owner, Bryant H. Prentice III, 80, donated the college to his family foundation, the Prentice Family Foundation. The foundation is a nonprofit that aims to stimulate economic growth and employment in western New York.

For-profit conversions are often scrutinized. Critics argue for-profit institutions fail to see students through to graduation or leave them with high debt levels. They argue some for-profits seek nonprofit status to avoid tougher tax burdens or regulatory scrutiny but simultaneously sign consulting or outsourcing agreements to keep cash flowing to their former owners.

In a statement, Bryant & Stratton called its conversion an “outright benevolent and unrestricted donation” and addressed its financial relationship with the Prentice family.

“Different than any other transaction leading to a change in status from for-profit to not-for-profit college that we are aware of, the College has not taken out a loan or entered into management or consulting agreements to pay money to the Prentice family,” the statement said.

The conversion is in part a financial decision for the college, according to the Rochester Democrat & Chronicle, which first reported on the change. Bryant & Stratton's president, Fran Felser, discussed the conversion in a YouTube video viewed by the Democrat & Chronicle that was subsequently removed.

“The college needs to change and grow to remain viable and the college needs cash -- all organizations need cash -- to invest in those initiatives and change and grow to remain viable,” Felser reportedly said in the video. “We will be able to invest more into the college for the benefit of our students.”

Plans call for the nonprofit Bryant & Stratton to maintain some business relationship with its former corporate owner. The for-profit company that owned the college is donating it to a new nonprofit entity under the Prentice Family Foundation. The for-profit company is taking on a new name, Prentice Realty Inc. The college will lease two of its 18 campus facilities from Prentice Realty Inc. The college hired a nationally recognized real estate organization to perform an analysis and ensure the leases are at market rate, consistent with a conflict-of-interest policy, according to a spokeswoman.

Felser, the college's president, is still listed as the leader of Prentice Realty Inc. in a New York State database of corporations and business entities. However, he is no longer president of the company, according to the spokeswoman.

Eight-year graduation rates for first-time Bryant & Stratton students fall between 14 and 43 percent, depending on the campus, according to the U.S. Department of Education's College Scorecard tool. The college has nine locations in New York, as well as campuses in Ohio, Virginia and Wisconsin. Median debt after graduation ranges from about $11,000 to $51,000. The college enrolls more than 10,000 students across its 18 campuses and online.

New York State holds for-profit and nonprofit institutions to the same regulatory standards and requires that the institution be governed separately from the foundation or the Prentice family, according to Bryant & Stratton. The college's current Board of Trustees will continue to govern it, along with two new board members appointed by the Prentice Family Foundation. It hasn't been decided whether Bryant Prentice will continue his current role as board chairman, according to the college.

The Association for Proprietary Colleges, a for-profit college lobbying group in New York State, said it supports Bryant & Stratton's conversion to nonprofit status.

“New York is unique in that the State Education Department exercises the same oversight for all colleges and universities, regardless of whether an institution is a public, proprietary or a not-for-profit institution,” said Joshua Poupore, a spokesperson for the association. “Bryant & Stratton College will continue to be required to meet all of the program registration standards and other requirements once the transaction is completed and the College converts to not-for-profit status.”

The conversion won’t have a significant effect on the college’s operations, according to a document filed with the New York State Department of Education.

“There is expected to be no impact on the daily life of the campus community. The College’s institutional mission would remain unchanged. The College would continue operating all its existing campuses, continue to serve its existing and future student populations, and retain all faculty and staff,” the document said.

The college received approval for the switch from the New York State Board of Regents and its accreditor, the Middle States Commission on Higher Education.

But Bryant & Stratton isn’t finished. The conversion still needs approval from the U.S. Department of Education, which could take between two and six months. The department surprised many in higher education last year when it denied Grand Canyon University’s request for recognition as a nonprofit, even after the for-profit university obtained nonprofit approval from a state regulatory agency and its regional accreditor.

At the time, Grand Canyon issued a lengthy rebuttal, saying the decision was "plainly at odds" with determinations from other state and federal agencies authorized to make nonprofit determinations.

"The decision of the Department to continue to treat the University as a proprietary institution for Title IV, HEA program purposes does not affect the University’s operations or its students, nor does it affect the University’s right to identify itself as a 501(c)(3) tax-exempt organization like its private, nonprofit university peers," the statement said. "It only means that the University will need to continue to comply with certain heightened regulatory requirements which, as can be seen from the above-described metrics, have never been an issue for the University and were not a factor in the University’s decision to return to its historical nonprofit status."

Experts wondered if the unexpected decision by the Department of Education would dissuade other for-profits from attempting to transition to nonprofit status, but for-profits have used different models to convert. For example, the University of Arizona recently acquired the formerly for-profit Ashford University, which is becoming the University of Arizona Global Campus, an independent nonprofit institution affiliated with the public university.

The incoming administration under President-elect Joe Biden could provide another incentive for for-profits to seek nonprofit status. Experts predict that the Biden administration will be tough on for-profit institutions. The Department of Education could bring back borrower-defense and gainful-employment rules put in place by the Obama administration that were subsequently canceled by President Donald Trump's education secretary, Betsy DeVos. The rules are designed to hold colleges, particularly for-profit colleges, accountable if their students are unable to find jobs that pay enough to cover the student’s education loan debt.

Biden’s administration could also try to require for-profit institutions to demonstrate their value to students in order to receive federal money. Some Democrats, including Massachusetts senator Elizabeth Warren, support requiring for-profit institutions to cover student loan debt that graduates cannot pay.

New York’s for-profit colleges aren’t worried about a potentially stricter U.S. Department of Education in a Biden administration because New York State’s standards are already high, Poupore said.

“New York has some of the most stringent standards for colleges and universities, and APC members are held to the same high, strict standards as our peers in the nonprofit and public sectors,” Poupore wrote in an email. “The data show that poor outcomes for minority and low income students are prevalent across all sectors of higher education, but in New York, APC member institutions perform as well as if not better than their peers helping the most disadvantaged students succeed academically.”