In recent years, a number of major for-profit operators such as Education Corporation of America, Vatterott Colleges, Education Management Corporation, ITT Tech and Corinthian Colleges have abruptly closed their doors under the weight of mismanagement, scandal and state and federal investigations. As a result, tens of thousands of students have been left wondering how to recover the time and money they invested in an education that suddenly vanished.
The Department of Education led by Secretary Betsy DeVos has harmed students by repeatedly giving bad actors in the for-profit college sector a pass. The department reinstated the Accrediting Council for Independent Colleges and Schools — ended in 2016 by the Obama administration for failing to hold accountable the for-profit schools it accredited — approved dubious conversions of for-profit colleges to nonprofit status and dismantled the accountability framework for colleges receiving federal student aid.
The department’s attempts to repeal the 2014 Gainful Employment rule, an important part of the accountability framework, is problematic since career education institutions would not be required to show that students who attend a program earn enough to pay back the debt they borrow to complete the courses. For-profits have lobbied hard to repeal or weaken this rule, which took years of research and analysis to put in place.
The department’s lack of oversight is exemplified by the train wreck of the career college chains formerly owned by for-profit EDMC, which were purchased in 2017 by the DOE-backed nonprofit Dream Center. Many of the former EDMC schools under the names Argosy, Art Institutes and South University have closed, but others are now in receivership, a form of bankruptcy in which a court appoints a person or “receiver” to assume control of the schools.
Since entering receivership, as much as $16 million in financial aid that was to be dispersed to students for living expenses, is now missing. Students have been left without resources to pay for rent, utilities and other critical bills, while the receiver continues to investigate where the funds have been diverted. Only after these revelations did DOE finally cut Argosy University off from receiving federal student aid, resulting in the closure of these campuses. Argosy University staff and faculty haven’t received their last paycheck and it is unclear if they will receive this money in the future.
Similarly, the DOE was left flat-footed by the sudden closure of roughly 75 for-profit Virginia College and Brightwood College campuses (under ownership by Education Corporation of America) across the country in late 2018. More than 19,000 students were left scrambling to find a way to finish their education or receive closed school discharges of federal student loans. While DOE bemoans the lack of notice given to students by ECA, many observers place much of the blame on the department, calling on DeVos to strengthen accountability for for-profit colleges that dupe students and leave taxpayers holding the bill.
Such is the case with Corinthian Colleges. If the Trump administration truly cared about students, the former execs of Corinthian Colleges wouldn’t have received a slap on the wrist by the Securities and Exchange Commission in a settlement reached at the beginning of the month. The execs defrauded tens of thousands of low-income students and saddled them with millions in student loans. In turn, SEC imposed $80,000 against Corinthian’s former chief executive and $20,000 against its former chief financial officer while DeVos’ DOE has responded by making deep cuts in student debt relief.
Whether it’s ECA, EDMC-DCEH, or Corinthian Colleges, all these closures have one thing in common: Students were left to bear the consequences of a massive failure of oversight by the Department of Education and irresponsible, predatory practices by for-profit colleges. Their welfare was sacrificed as DOE kept the financial aid spigot open to these for-profit schools despite years of red flags raised by dismal school performance metrics, student complaints, investigations by state regulators and AG’s and industry watchdogs.
For many students, the Closed School Discharge program that provides relief for students at institutions that shutdown is the only option that makes sense. And yet, Devos has said the program is too generous to the very same students left bearing the cost of poor oversight. Fortunately, a federal judge ruled in September that her attempt to limit program benefits to students left in the lurch was unlawful.
Those students who forgo the discharge and transfer to another institution can have trouble transferring their for-profit credits since many of these schools are accredited by agencies that are not recognized by their non-profit peers. Even with a closed school discharge, much of the damage to students cannot be mitigated. Students have lost precious time, delayed or cut back on employment and often forfeited the only window of opportunity they had to attend school given the many other obligations they face. The Department of Education should increase accountability for career education schools and discontinue its cynical call for increasing “access” for low-income students through a hands-off approach to bad actors in the for-profit industry.
Cheye-Ann Corona is a senior policy associate with the Center for Responsible Lending.
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