The potential for the November elections to shift the balance of power in the legislative and executive branches makes this year important for operators of for-profit colleges.

Already, 2020 has seen the continuation of the sector’s years-long shift into new business models, at least partly in response to stricter oversight from the Obama administration. One way is by selling their colleges or spinning them off as nonprofit entities and then moving on to function as an ed tech services provider — in some cases for their former institutions.

Zovio, formerly known as Bridgepoint Education, announced this month that it is aiming to separate Ashford University by June 1. That follows the U.S. Department of Education’s preliminary review of the proposed change last year, in which it stated that Zovio would need to put up $103 million in collateral. The company plans to provide ed tech services to the online university, which is seeking nonprofit status with the department.

The outcomes of the 2020 elections are, of course, anything but decided. Some may have expected the year to be characterized by a rush to seek cover from Obama-era rules targeting for-profit colleges while they’re still under the purview of an administration that has sought, with some success, to roll them back.

That window is closing, analysts say, and the department’s decision this fall to deny Grand Canyon University’s (GCU) request to be considered as a nonprofit for Title IV purposes suggests there is a high bar to clear for colleges seeking nonprofit conversions and other complex changes of control.

“You are kind of at the wire now if you want the Department of Education that is operated by the Trump administration to be the one that decides whether or not you can be allowed to do the thing you want to do,” said Trace Urdan, managing director with education consulting and investment banking firm Tyton Partners.

But with the Grand Canyon decision, he added, “it’s not at all clear that it’s some kind of slam dunk to get the Trump administration to go along with your plans.”

Ed Dept weighs in on nonprofit conversions

In November, the department formally responded to Grand Canyon University’s (GCU) request for a review of its proposed separation from its publicly traded parent company of the same name. The IRS, its accreditor and state regulators had already signed off on the arrangement. The department approved the change in control but not the nonprofit status.

Specifically, it took issue with shared leadership between Grand Canyon Education (GCE) and the university, and argued that the transaction was primarily done to benefit GCE’s shareholders. It also criticized that the agreement made GCE the university’s exclusive provider of several ed tech and administrative services in exchange for a roughly 60% cut of its revenue from tuition and other sources.