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Bryant and Stratton College looks to become nonprofit


Buffalo-based Bryant and Stratton College is in the process of converting to nonprofit status, according to school representatives and documents filed with the state Department of Education.

The change has already been made with the state Board of Regents and the Middle States Commission on Higher Education, the school's accreditor. It is now waiting for final approval from the U.S. Education Department.

The switch from for-profit to nonprofit status will have little immediate impact on students or the school's mission, President Fran Felser said in a video message posted to YouTube Nov. 23 and subsequently removed.

The main benefit, he said, is financial: namely, the opportunity to stop paying income taxes.

"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 said. "We will be able to invest more into the college for the benefit of our students."

The school until now has been owned and controlled by Bryant H. Prentice III, a descendant of the college's original founders in 1854. There are about 7,600 students enrolled at its New York campuses, including in Greece and Henrietta, in addition to sites in Ohio, Virginia and Wisconsin. 

To gain nonprofit status for the college, Prentice, 80, is transferring ownership to a New York-based nonprofit corporation — in effect donating the entire value of the for-profit enterprise.

The college said in a statement that the donation is unrestricted and amounts to "one of the larger singular donations we're aware of in Western New York."

"This donation is part of (Prentice's) estate planning as a gift that would provide an enduring legacy to help the communities where the College has served for the past 165 years," the college said.

A reckoning for for-profit colleges

The change comes as the for-profit higher education industry braces for a reckoning with the departure of its champion, U.S. Education Secretary Betsy DeVos. She persuaded President Donald Trump to rescind a rule that withheld funding from schools who routinely left graduates with high levels of debt and no means of paying it off.

Bryant and Stratton was seen as one such school. About 20% of its students default on their loans, according to data presented to the Board of Regents, compared to state and national averages of 9% and 10%. A 2018 report by the Center for an Urban Future found that 79% of Bryant and Stratton graduates failed to pay off any capital of their student loans within three years of graduation.

The school was placed on a federal monitoring list in 2015 over concern about its financial practices. It was removed from that list within a year, and college leaders shared federal data showing improved financial health since then.

For-profit colleges increasingly have sought to convert to nonprofit status over the last decade, a trend that critics argue breeds conflicts of interest and allows operators to extract money through favorable operational and real estate deals. The U.S. Government Accountability Office in 2019 opened a review into the U.S. Education Department and Internal Revenue Service oversight of such maneuvers.

"In many cases, the (conversions) have involved long-term contracts, real estate arrangements, and other schemes to keep much of the school’s revenue flowing to former owners, who remain in a position to control the institution,"  Robert Shireman, a fellow at The Century Foundation and a former U.S. Education Department official, wrote in 2018.

The difference with the Bryant and Stratton transaction, representatives said, is that there are no loans or management or consultant agreements involved to funnel money back to the Prentice family.

"This is entirely consistent with the Prentice Family’s desire to make a benevolent donation so that College can continue to serve students and the community for many years to come," the college wrote.

The existing Bryant and Stratton board of trustees will serve as the new board along with two members appointed by the Prentice Family Foundation. Bryant Prentice is the current chairman but it has not been decided whether he will continue in that role, a college representative said.

The college will lease two of its 18 campuses from Prentice Realty Inc., a holding company, at an independently verified market rate. Felser, the college president, is currently the CEO of that company.

Contact staff writer Justin Murphy at jmurphy7@gannett.com