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Even if Ashford University converts itself into a nonprofit, the investors in its parent company may still be able to line their pockets with federal dollars.
For years the owners of Ashford University – a beleaguered for-profit college accused of high-pressure enrollment practices and poor performance – have been working to assuage concerns about the online school’s practices.
The most recent attempt involves attempting to reconfigure the school as a nonprofit. But even if Ashford manages to gain nonprofit status, there will still be loopholes that allow it to funnel profits back into its parent company, Zovio.
The owners of Ashford University recently decided to give up plans to sell the school. Instead they are opting to attempt to turn the school into a nonprofit, as the San Diego Union-Tribune reported last week.
The new nonprofit Ashford – which has received millions in federal funds and suffered from low graduation rates – would be able to continue to do business with its for-profit parent company Zovio, formerly Bridgepoint Education. Zovio would technically no longer control Ashford, however.
This type of separation among corporate entities is a strategy used by several K-12 charter school companies across California. Most notoriously, A3 Education used a similar corporate setup as a way to allegedly defraud taxpayers of $80 million.
Before I get into this riveting explanation of corporate structure, a little background on Ashford from a story I wrote last April:
Salespeople made a thousand cold calls a week. Every time they got a new client, a cowbell rang or plastic hands clapped. It was a “boiler-room atmosphere” straight out of the movie “The Wolf of Wall Street,” said one worker.
Only these weren’t really salespeople, they were admissions counselors at Ashford University in San Diego, according to a lawsuit filed by California’s attorney general in 2017.
One supervisor even kept the key cards of terminated employees on a ring and dangled it in front of admissions counselors to let them know the price of not hitting their sales targets, according to the suit.
Ashford serves a significant portion of veterans and receives millions of dollars in federal student aid money and GI Bill benefits.
Yes, Ashford generated quite the scandal with its online, for-profit university model. So has Zovio and before it, Bridgepoint Education. Until last year, the company was headquartered in San Diego.
Here’s how we summed up the problems at Bridgepoint in 2011: “Criticism of the company centers on its remarkable ability to attract students and remarkable failure to graduate them, all while receiving hundreds of millions in federal student aid dollars.”
This new corporate structure would allow Zovio to continue to profit from the taxpayer dollars that get paid out to Ashford, in order to help low-income and military students attend school.
But in such arrangements, it is often difficult to tell who is controlling the different entities, which on paper appear to be separate.
Learn4Life and Inspire are two “non-classroom based” charter school chains operating in California. Inspire is mostly online. Learn4Life students usually meet with a teacher once a week, in schools that are often operated out of storefronts. Both enroll tens of thousands of students across the state.
But on paper, each of the schools operated by the two companies appear to be non-related, separate entities. The schools use names like Diego Valley East and Cabrillo Point Academy.
Each school is technically an independent entity, controlled by its own board of directors. These boards, however, are appointed by Learn4Life and Inspire. And over the summer, a judge ruled that all of the Learn4Life schools, though technically separate, were in fact controlled by Learn4Life.
Each of the schools pay out a certain percentage of their state revenue (usually around 15 percent) to the home offices of Learn4Life and Inspire. In August, I revealed that one of Learn4Life’s vice president was involved in related-party transactions that helped him line his pockets with state money twice.
John Helgeson was making money as an executive with Learn4Life, but Learn4Life was also directing taxpayer money into a for-profit company, which Helgeson partly owned.
Inspire is being investigated by state officials, after a U-T story questioned some of its practices.
Unlike Zovio, the parent companies of Learn4Life and Inspire are registered as nonprofits.
State lawmakers recently placed a two-year moratorium on any new non-classroom based charter schools.
The bottom line: Even if Ashford converts itself into a nonprofit, the investors in Zovio may still be able to line their pockets with federal dollars, even while the school produces poor student outcomes.