Ed Department finds closed for-profits owe over $6M

Dive Brief:

  • Two shuttered for-profit institutions owe a total of more than $6 million, the U.S. Department of Education’s office of Federal Student Aid said Tuesday.
  • RWM Fiber Optics Inc., which offered network cabling and television installation training in California before closing in 2018, owes the department $2.4 million because of student aid violations. The total covers federal financial aid program funds disbursed from 2015-16 to 2017-18.
  • Harrison College, which operated 11 campuses in Indiana and Ohio before it closed in 2018, is liable for $3.6 million the government paid to discharge direct loans for borrowers who received closed-school loan discharges. FSA also previously said Harrison owed more than $2.9 million for closed-school discharges.

Dive Insight:

The Education Department cast Tuesday’s announcement as a shot across the bow at irresponsible postsecondary providers.

“Schools that engage in bad behavior or that suddenly close their doors, leaving students out in the cold, will be held accountable, and we expect other schools to pay attention to the actions we are taking today,” FSA Chief Operating Officer Richard Cordray said in a statement.

The move comes after the department took several other actions to change the direction of parts of the government’s student loan apparatus. Last week, it announced plans to rewrite regulations covering a number of student loan-related issues, including Public Service Loan forgiveness, income-contingent repayment plans, borrower defense to repayment and closed-school loan discharges. On Monday, it signaled it will give states more freedom to regulate student loan servicers.

But Tuesday’s actions demonstrate a new, harder line for the way the department oversees colleges, experts at left-aligned think tanks said. The Biden administration was clear early on that it would focus on students’ well-being and hold institutions accountable for student outcomes, Nicole Siegel, deputy director of education at the left-leaning think tank New America, said in an email. Siegel called the attitude a “sea change from the previous administration” and said it signals the “federal government’s understanding that all institutions of higher education should leave students better off than before they started.”

It’s notable that the Education Department is assessing liabilities against institutions that closed years ago, said Yan Cao, senior fellow at The Century Foundation.

“It signals much stronger enforcement and puts schools on notice that they may be expected to return 100% of the Title IV proceeds they’ve received over the course of many years,” Cao said.

FSA announced the liabilities after completing program reviews for the two institutions. 

The RWM case started in September 2018, when FSA started a routine compliance review with student aid program regulations. The government agency found 16 violations, including that the school falsified Free Application for Federal Student Aid information so some students seemed to be eligible for financial aid who were not. 

RWM falsified high school diplomas and GEDs, listed students as having dependents who did not exist to inflate financial aid awards, and submitted FAFSAs without giving students the chance to review them for accuracy, according to FSA. 

The school stopped taking part in the federal student aid program in December 2018, and it closed.

Harrison’s case comes after it announced its 11 campuses were closing in September 2018. The institution enrolled about 2,100 students at that time.

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