- Rep. Lucy McBath introduced a bill to strengthen accountability for for-profit to nonprofit college conversions.
- McBath said the conversion process has misled students, leaving them with student loans and nontransferable credits.
- This comes after Biden's Education Dept. canceled $1 billion in student debt for defrauded borrowers.
- See more stories on Insider's business page.
Last month, President Joe Biden's Education Department canceled $1 billion in student debt for borrowers defrauded by for-profit schools. And on Wednesday, House Democrats introduced a bill to further strengthen protections for those students by monitoring status changes from for-profit to nonprofit institutions.
Rep. Lucy McBath of Georgia, along with Reps. Sara Jacobs of California and Kathy Manning of North Carolina, introduced the For-Profit College Conversion Accountability Act, which would strengthen accountability measures at the Education Department during the conversion or sale of a for-profit college.
The Government Accountability Office identified 59 for-profit college conversions between January 2011 and August 2020, and according to McBath's statement, many of those schools misled students throughout the process. McBath cited Georgia's Argosy University, which attempted to convert to nonprofit status and ended up closing in 2019, leaving 1,500 students with nontransferable credits and student loans.
"We must protect the success of our students as they pursue higher education. In my own district, we saw first-hand what happens when an institution of higher education attempts to evade accountability," McBath said in a statement. "The closure of Argosy University in 2019, after months of misleading students and an attempt to convert to nonprofit status, ripped off thousands of students and veterans, leaving them with nontransferable credits, huge amounts of student debt, and degrees that aren't worth anything."
McBath's legislation would establish explicit eligibility requirements, require conversions to be public with advanced notice, prohibit the institution from marketing itself as a nonprofit until the Education Department has approved it, and creates an office in the Department to monitor the conversion and determine the institution's eligibility.
On Tuesday, the House Committee on Education and Labor held a hearing to discuss for-profit college conversions, and Chair Bobby Scott said in his opening statement that "poor oversight" from the Education Department and Internal Revenue Service allowed harmful conversions to take place.
"We must ensure students and taxpayers are protected from deceptive schemes that undermine the integrity of our higher education system," Scott said.
Insider reported on Saturday that for-profit colleges have been misleading students for years, causing them to take out more student loans than they can pay off. Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, told Insider that she was happy with the recent debt cancelation for some defrauded borrowers, but many are still struggling to get relief.
"To tell somebody, 'Yup, we agree, you were defrauded by your school, and you still have to repay all of your debt' is insane," Mayotte said. "I mean, there's no other industry where they do that."