A separate set of Obama administration regulations, however, has prompted a new kind of finagling, according to Robert Shireman, a senior fellow at the Century Foundation. In a report out this week, Shireman argues that a growing number of for-profit colleges are converting to nonprofit status even though they’re effectively continuing to operate as for-profits—a trend on which news outlets have been reporting for some time. Shireman’s report offers perhaps the most comprehensive analysis in that it’s based on a wealth of communications and other records acquired from the Education Department and IRS, which regulates nonprofits. Focusing on four case studies—Herzing University, Remington Colleges, Everglades College, and the Center for Excellence in Higher Education—Shireman identifies what he describes as a “regulatory blind spot” in which the DOE and the IRS each think the other entity is making sure these colleges play by the rules.

It’s not hard to understand why converting to nonprofits would be increasingly appealing to for-profit schools. For one, the Obama administration’s new “gainful employment” policies specify that in order to receive federal student aid, for-profit schools must provide affordable training that leads to well-paying jobs. Traditional programs at nonprofit colleges are exempt from these policies (though nonprofit certificate programs aren’t). For another, given how much bad press the for-profit sector has gotten—largely thanks to the high-profile meltdown of Corinthian Colleges earlier this year, as well as the scathing results of a recent two-year Senate investigation into such institutions—these conversions provide an opportunity to regain the public’s confidence.

Nonprofits are, by definition, run by people who don’t have a financial interest in the organization’s outcomes. “Putting non-owners in control,” Shireman writes, mutes “the temptation to ‘cut corners on quality or otherwise take advantage of user vulnerability.’” But according to Shireman, the one-time owners of the four institutions included in the report have in some way retained control of those schools. These former for-profit heads, he argues, still have a big say in the operations of the now-nonprofit schools—and some may even continue to reap what amounts to millions of dollars from those institutions.

Herzing, for example, became a nonprofit in January after it was bought out by a tax-exempt organization that the for-profit college’s co-founder, Henry Herzing, had formed a few years earlier. That nonprofit—the Herzing Educational Foundation Ltd.—continues to lease property from Herzing family members, according to Shireman. The foundation has defended the integrity of the conversion; its attorneys told Shireman that any transactions have been approved by an independent board and that the institution has complied with conflict-of-interest rules. But a day after the nonprofit purchase went into effect, a state official quoted in the Milwaukee Journal Sentinel contended that Herzing had made the switch both to avoid federal regulations and tap into state grant funding. Congress has since questioned the move, with the IRS indicating that Herzing University’s nonprofit application is “undergoing substantive review.” (A spokesman for Herzing’s accreditation agency, the Commission for Higher Learning, declined to comment on Shireman’s report.)