GCU Wins Suit Against USDE

"The U.S. 9th Circuit Court of Appeals has ruled that the U.S. Department of Education unlawfully denied nonprofit status to Grand Canyon University, one of the country's largest Christian higher education institutions. In a 3-0 decision, the panel instructed the department to revisit GCU's status using the correct legal standard under the Higher Education Act. The department overstepped its authority by using an incorrect standard, the court ruled."

Here's the article.

I wonder what the implications are for the $38 million fine...

 

This ruling all depends on if the DOE fights it and if their new assessment declares them a non-profit. Based on the article itself there is a clear discrepancy in how GCU manages profits:

“The U.S. Department of Education refused to recognize the university's lawful nonprofit status in 2019 over concerns about the school's revenue going to a former for-profit owner.”

This would seem to go against rule for non-profit universities that they be “owned and operated by a nonprofit corporation.”

 

The dispute, as with other sales or conversions of for-profit schools to either not-for-profit schools or their own not-for profit status is the payout of the owners. Schemes to pay them out from future revenues and/or enrollments jeopardize the actual spirit of a not-for-profit. The argument is that they remain for-profit because revenues are still enriching the (former) owners.

This is a dilemma inherent in the concept. After all, the owners have to get paid for surrendering their asset, right? But how? If the school has cash, it would be figured into the purchase price, so that can't be a source. What then? Future revenues.

I don't have a dog in this hunt, and I'm not saying who's right or wrong here. I think the concept of turning a for-profit into a not-for-profit through a sale is fundamentally incongruent. In this argument, there will be a winner and a loser because of that.