The Obama Administration's ongoing efforts to regulate the for-profit college industry have yielded a $30 million fine against Corinthian Colleges and threaten to result in similar penalties against other schools.
On April 14, the U.S. Department of Education informed Corinthian
that it intended to fine the for-profit education company's Heald College subsidiary $29.66 million for misrepresenting its placement rates to current and prospective students and to its accreditors, and for failing to complete with federal regulations requiring the complete and accurate disclosure of its placement rates. Heald is a 13-campus subsidiary with schools primarily in California and other western states.
The government claimed that it had identified more than 900 separate instances of The government's sanctions also prohibit Heald from enrolling new students.
"This should be a wake-up call for consumers across the country about the abuses that can exist within the for-profit college sector," Education Secretary Arne Duncan
said in a statement. "We will continue to hold the career college industry accountable and demand reform for the good of students and taxpayers."
As noted by Inside Higher Ed
, the regulation used to punish Corinthian and Heald is a a job-placement requirement adopted in 2010 that "has emerged as a possible tool to crack down on for-profits." The regulation requires colleges to disclose job-placement rates of graduates in programs that fall under "gainful employment."
With respect to Heald's violations of the accurate job-placement reporting requirements, the Education Department's findings were devastating.The Huffington Post reported
that the government had found that Heald’s "inaccurate job placement rates constituted a 'substantial misrepresentation,' a finding that allows the department to prohibit the school from accessing federal student aid such as Pell grants and loans that students would use to pay for tuition."
"For example, Heald allegedly misled prospective students by advertising false job placement rates that omitted the fact that many of its graduates simply weren’t counted. It also told prospective students that it confirmed graduates’ employment with the graduate or her employer. In reality, the Education Department said, the school in many cases simply relied on its own career services staff for confirmation."
"Heald also paid staffing agencies to hire its graduates, the Education Department said, and counted them as officially employed in their field. In one case, the department found a Heald graduate who only was employed for two days moving computers and organizing cables."
Education Management Corp., the Pittsburgh-based for-profit education giant with more than 100 campuses around the country, is undergoing major structural change.
EDMC operates around 110 schools in more than than 30 states, including The Art Institutes, Argosy University, Brown Mackie College and South University.
Eight members of the company's 11-person board of directors have resigned as the company repositions itself by cutting debt in the wake of financial losses and federal regulation, according to news reports
. EDMC's president and chief executive officer Edward West will remain on the company's smaller board.
According to the Associated Press, "The company is now privately held and two of its new board members announced Tuesday are John Danielson, chairman and managing director of the Chartwell Hamilton Group LLC, a New York-based educational consulting firm; and Johnathan Harber, the founder of Schoolnet Inc., a firm that develops online learning solutions and helps schools implement learning standards, including Common Core."
The AP noted that the changes come at a time when the company has lost $684 million during the last year "and could face penalties from the federal government based on the alleged recruiting violations as well as a class-action suit by investors filed in U.S. District Court in Pittsburgh in September."
"The company is still attempting to settle U.S. Justice Department litigation accusing it of illegally using enrollment incentives to pay its recruiters, and Tuesday's moves are believed to be part of an overall effort to solve the company's regulatory, legal and financial troubles," the AP said.
California consumer protection officials have ordered the once-venerable Corinthian Colleges to stop enrolling new students at its remaining 13 Wyotech and Everest College campuses in the state due to growing concerns about the schools' viability.
According to a report in the Orange County Register
, officials with the state's Bureau of Private Postsecondary Education cited concerns over the schools' financial resources, mounting legal pressures and inadequate regulatory disclosures
in issuing the order to stop new enrollments to Corinthian, which does not require the for-profit company to cease operations.
California bureau chief Joanne Wenzel said in a statement that the order was necessary to “protect individuals who may have been thinking about enrolling at these schools.”
The Register report added: "Corinthian has been seeking to sell its California campuses since June under an agreement with the U.S. Department of Education and has previously argued that continuing to enroll students was necessary to maintain their financial viability and prevent school closures.The agreement with the U.S. Department of Education followed years of increasing scrutiny by state and federal regulators over the accuracy of Corinthian’s job placement statistics and loan practices, and marked the beginning of the company’s slow unraveling. Corinthian officials maintain that regulators have unfairly targeted them for isolated incidents of employee misconduct and their business model performs a valuable role in educating students who are under-served by more traditional institutions."
The Santa Cruz Sentinel profiles
one of the Corinthian 100 participating in a debt strike: a 22-year-old server at a pizza restaurant who incurred $30,000 in debt during an eight-month medical assisting program at Everest College that she was unable to complete.
Makenzie Vasquez told the newspaper that she was refusing to pay back her loans for a program that oversold and under delivered.
“They sold me a dream for a nightmare,” said Vasquez. “I shouldn’t be 22 and be in this much debt and have nothing to show for it.”
Another leader in for-profit education is undergoing retrenchment at a time of increased federal regulation and public attention of the industry.
According to published reports in publications including the Consumerist
and the Oregonian
, DeVry University students at 14 campuses in 11 cities -- including the company's Southfield, Michigan campus -- will only have the option of taking classes online by year-end in a company effort to save expense.
The Oregonian stated that "the closures are part of a national trend among for-profit universities, which have been criticized for high tuition costs, low retention rates and heavy federal support."
In an obtuse April 23 news release to the investment community, DeVry did not detail the closures, but alluded to changes to improve the company's bottom line: "Near-term, the university is taking action to differentially invest in its strongest markets and programs; reduce its cost structure; and establish a distinct voice for its brand," the statement said, "In addition, DeVry University is implementing strategies to place it on a path for growth by enhancing the teaching and learning model, addressing affordability, and strengthening employer workforce solutions. Taken together, these actions are designed to maintain positive economics in fiscal 2016."
In addition to the Michigan campus in Southfield, DeVry is reportedly closing two campuses in Houston, one in Indianapolis, one in Memphis, one in Milwaukee, one in Minneapolis, one in Pittsburgh, one in Portland, two in Seattle, one in St. Louis, and two in Tampa.These closures may make it more difficult for hundreds of students to complete the programs that they intended to pursue at the time of their enrollment.
If you are a student or faculty with concerns about how the DeVry closings may impact people whose education and jobs depend on the DeVry campuses scheduled to close, you can share those concerns with attorneys at College Watchdogs here.
The Huffington Post reports
that the U.S. Department of Education is nearing a settlement with the lender Navient over allegations that this Sallie Mae spin-off violated laws in its student loan lending practices to veterans.
"The agreement likely would end the Education Department's much-delayed and heavily-criticized probe into whether the nation’s largest student loan specialist -- a major government contractor -- broke the law that caps interest rates and provides other special financial protections for active-duty members of the military," the website said.
"The Education Department’s investigation followed a May deal with the government in which Navient settled federal accusations that it had intentionally overcharged about 60,000 active-duty troops on federal and private student loans over nearly a decade. The company, which neither admitted nor denied wrongdoing, agreed to pay $60 million to troops as part of its settlement with the Federal Deposit Insurance Corp. and the Department of Justice."
"Despite the Justice Department’s detailed complaint, which followed a referral by the federal Consumer Financial Protection Bureau, Education Secretary Arne Duncan later announced a 'thorough' review to determine whether the company indeed overcharged troops."
A federal judge has tossed a lawsuit brought by a handful of student-loan debt collectors seeking to dispute their firing by the U.S. Department of Education for allegedly providing inaccurate information to borrowers about their loans and rights.
The ruling by a judge on the U.S. Court of Federal Claims denied the stay that the companies were seeking to prevent being dropped from the federal government's loan collection business.
The companies whose contracts were cancelled by the Department of Education in March are Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
University of Phoenix has experienced steep enrollment declines, dropping from a height of 460,000 students at its campuses five years ago to 213,000 now, according to statistics released by its parent company, Apollo Education Corp.CNN Money has stated
that "Apollo's fast fall is another sign of the decline in for-profit education . . . Once a cash cow industry, for-profit education companies have struggled to overcome criticism of the quality of its education and the costs. They're the sore spot in the national debate about value of higher education."
The U.S. Department of Education has released a list of more than 500 trade schools, colleges and universities on a watch list
for greater oversight by the federal agency responsible for the federal student loan program.
In releasing the list, the agency explained
that it can elect to place institutions receiving federal student aid on "heightened cash monitoring" due to "compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school's administrative capabilities, concern around a schools' financial responsibility, and possibly sever findings uncovered during a program review."
Nine schools operating in the state of Michigan appear on the list: Ecumenical Theological Seminary
in Detroit; Everest Institute
in Southfield; Everest Institute
in Grand Rapids; Finlandia University
in Hancock; Kuyper College
in Grand Rapids; Martin Parsons Academy of Design
in Marysville; Olivet College
in Olivet; the Robert B. Miller College
in Battle Creek; and Rochester College
in Rochester Hills.
A Department of Education official, Ted Mitchell, said in a statement that the list is "not necessarily a red flag to students and taxpayers, but it can serve as a caution light."
You can share concerns about the list or one of the schools that appears on the list with an attorney at College Watchdogs here
or by call 877-540-8333.
The attorneys general from nine key states are calling upon the federal government to forgive federal loans issued to thousands of students at Corinthian Colleges, which imploded last year after years of criticism of sharp practices in enrolling adults in expensive programs with few job prospects after graduation.In a letter to Secretary of Education Arne Duncan
, these top Democratic prosecutors last week urged the U.S. Department of Education "to immediately relieve borrowers of the obligation to repay federal student loans that were incurred as a result of violations of state law by Corinthian Colleges, Inc."
The attorneys general were from Massachusetts, California, Connecticut, Illinois, Kentucky, New Mexico, New York, Oregon and Washington.
The call for debt relief comes at a time when a group of 100 former students of Corinthian are refusing to pay
their loans used to pay for programs that they say were worthless.
In 2014, Corinthian announced that it would be closing and selling off its schools such as Everest and Wyotech after U.S. Department of Education officials froze access to federal financial aid for three weeks at a time when the company was facing multiple challenges, including a lawsuit by the Consumer Financial Protection Bureau.