If You Want a Lot of Cash, Don't Rob a Bank, Open a Visa Mill!

By David North on January 17, 2018

If you want to secure a whole lot of money, and don't care how you get it, don't rob a bank, open a visa mill! As much as $53 million a year — all tax-free. You will get much more loot than in a bank heist, there will be no physical danger, and the government will either help your school or look the other way.

Visa mills are an immigration concern because they attract thousands of low-skilled aliens (the schools routinely have 100 percent admission rates). Most of the alien students, who secure, at best, fourth-rate educations, immediately obtain government-subsidized jobs, depriving un-subsidized resident workers of the same jobs.

Government subsidies for foreign students that are denied to American ones? Absolutely!

Why should a pizza parlor operator pay a citizen worker $100.00 for 10 hours work when he can hire a visa mill student for the same 10 hours — all legally — for $92.35? The missing $7.65, which should go to the Social Security and Medicare trust funds, does not need to be paid by the employer of an F-1 (student) visa holder, because of the government's misguided Curricular Practical Training and Optional Practical Training programs.

A visa mill is defined as a lesser educational institution that provides more in work permits for aliens than in education. This posting was inspired by reading the most recent income statements (Form 990) provided to the government by four highly prosperous but marginal schools that, if you will, major in Work Permits for Aliens. The four were among a larger group of 55 examined in the recent CIS Backgrounder "The Dregs of Higher Education Damage Our Immigration System".

Here's what the most recent 990s, which the schools file as late as possible within the law, show about the four's lush finances:

Institution Profit 2014
Profit 2015
in Profit
Profit Margin 2015 Gifts 2014 and 2015

Northwestern Polytechnic University
Fremont, Calif.

$28.2 $53.5 +90% 73% 0
Silicon Valley University
San Jose, Calif.
$0.4 $13.3 +3,325% 66% 0

California University of Management, & Sciences
Arlington, Va.

$0.04 $3.5 +8,700% 52% 0
Virginia International University
Fairfax, Va.
$2.0 $8.5 +325% 41% $127,802

All four, as recorded in the CIS Backgrounder, were at the time unaccredited by any accreditation organization recognized by the U.S. Department of Education, such accreditation not being required by the U.S. Department of Homeland Security for the DHS license to set in motion the issuance of F-1 visas. All four had the DHS license, with about 95 percent or more of their students being aliens.

The most profitable of them, Northwestern Polytechnic University in Fremont, Calif., secured more than $53 million in untaxed profits in 2015, while scoring a 73 percent profit margin, something rarely seen outside the illicit drug trade. For every dollar of revenue, NPU pocketed 73 cents in profits, none of it subject to any federal or state corporate income tax.

That's $53 million in tax-free profits for just one of these entities in one year.

Why tax-free? Because the IRS proclaimed NPU and the other three to be non-profit charities, and the IRS continues to do so despite the outlandish profit ratios and other strange behaviors.

The other three visa mills with recently available and revealing 990s, are Silicon Valley University, in San Jose, Calif.; Virginia International University, in Fairfax, Va.; and the California University of Management & Sciences located a few miles from VIU in Arlington, Va. Their 990s, roughly equivalent to (but more detailed than) the 1040s we all file, show that SVU's profits soared from a modest $0.4 million in 2014 to more than $13.3 million in the following year. VIU did not do quite that well, but it did increase its profits from $2.0 million in 2014 to $8.5 million the next year. That's an increase of 325 percent, the kind of increase most hedge fund managers can only envy, particularly in view the tax rate: zero.

In addition to unreal profit margins, the 990s also show a rapid expansion of net assets, from a total of $84.7 million (rounded) for the four schools in 2014 to $153.4 million in the following year, a gain of $68.7 million. This gain came despite the total lack of gifts or grants to three of the schools, and a measly $127,802, over two years for the fourth. The gains were also despite some questionable financial practices described in the CIS Backgrounder on 55 visa mills cited earlier.

The gain in assets came in spite of miserable returns on their net worth, which ranged from 0.003 percent (really!) to 0.84 percent in the year in question.

The gain in assets also came primarily from charging substantial tuition and other fees to the students, while spending relatively little on teaching.

An indicator of where these schools spend their funds is the percentage of their salary payments going to executives, managers, and support people, as opposed to those going to other staff, such as the faculty. One line in Form 990 is devoted to the salaries, other than those to the top executives, and it shows two categories, "program services expenses", and "management and general expenses". Management salaries as a percentage of the total salaries can be gleaned from this source (line 7, Part IX of the 990s). We then looked up the same data in the 990s of five mid-sized traditional schools (not a random sample, but indicative).

The four visa mills:

  • CALUMS: 37 percent
  • SVU: 40 percent
  • VIU: 63 percent
  • NPU: 73 percent

Five other schools:

  • Brandeis University, Waltham, Mass.: 7 percent
  • Catholic University, Washington, D.C.: 8 percent
  • Berea College, Berea, Ky.: 13 percent
  • Moorhouse College, Atlanta, Ga.: 17 percent
  • Swarthmore College, Swarthmore, Pa.: 19 percent

The four visa mills are spending a hugely higher proportion of their payroll on management types as opposed to teachers when compared to the other schools. Note that the range for the other five schools, from 7 percent to 19 percent, does not even overlap with the visa mills' range, of 37 percent to 73 percent. The comparison at the extremes is a ratio of more than 10 to one.

The principal reason for the difference is the feeble amount spent on the faculties in these visa mills, faculties made up almost entirely of ill-paid adjunct professors, mostly teaching only a few hours a week each.

These are obscure institutions and all levels of governments ignore them beyond the ultimate gifts of letting them have the power to issue the paper that leads to the F-1 visa and the power to grant to all their alumni and most of their students an easy path to subsidized American jobs.

The IRS could question their charity status; the State Department could stop issuing visas to many or all the students accepted at such places; and the Student and Exchange Visitor Program, part of the Department of Homeland Security, could crack down on the abuses in these programs — but none of them lift a finger, nor do state governments — with one honorable exception.

The exception is the State Council on Higher Education in Virginia (SCHEV), which recently closed one visa mill in Northern Virginia and a couple of years ago terminated another one in the same general area.