June 6, 2016

As APSCU Meeting Opens, Ex-Members Make Big News


The for-profit college trade association APSCU opened its conference today in Orlando, and amid sessions about dealing with increased government scrutiny after APSCU’s failed lobbying strategy, there was news about two former APSCU members:

Massachusetts Attorney General Maura Healey today announced a June 2 agreement under which for-profit American Career Institute (ACI), which shut down abruptly in 2013, has admitted to deceiving students and falsifying documents.  According to Healey, in 2012 alone, ACI received more than $30 million in federal student aid, about 89 percent of its total revenue.  Healey alleged, and ACI admitted, according to Healey’s press release today, that ACI was engaged in “knowingly overstating the employment prospects for its graduates; falsifying student signatures, enrollment records, attendance, and grades; and using unlicensed instructors, inadequate books and instructional materials, valueless  externships, and providing no meaningful career placement services.”

The court judgment calls for ACI to pay more than $25 million in civil penalties, fees, restitution and injunctive relief, but Healey said those amounts were “largely uncollectible and suspended as a result of the school’s insolvency.” In  addition, “The school’s officers and directors are also permanently prohibited from operating or managing any career or vocational training school in Massachusetts.” Healey said she would cite the admitted violations to request that the U.S. Department of Education cancel all federal loans from “at least” those students who attended ACI from 2010 through 2013.

I spoke with ACI’s co-owner and CEO, Andree Fontaine, on the day her school collapsed back in 2013 (see pages 40-43 here), and it seemed like a familiar tale in this industry, where the lure of fast-flowing federal money seems, to some, irresistible.

Fontaine was one of many for-profit college executives who tried, with APSCU’s leadership, to prevent efforts by the Obama Administration to tighten accountability standards for the industry. In a 2010 letter to the U.S. Department of Education, Fontaine urged the administration not to move ahead with its proposed “gainful employment” rule, which will cut off federal student aid to programs that consistently leave students with insurmountable debt. Fontaine’s letter claimed that the rule would threaten her school: “Our employees are vested in our students needs… One only need visit one of our campuses to see the care and attention given to our students.”

This afternoon, the U.S. Department of Education announced it has doubled the amount that predatory for-profit college ITT Tech must provide in a letter of credit — from 10 percent of the company’s annual haul of federal financial aid to 20 percent.  The Department said it was acting after ITT, on April 20, got a show-cause letter from its accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) stating “that a number of actions called into question ITT’s administrative capacity, organizational integrity, financial viability and ability to serve students in a manner that complies with ACICS standards.”  Failure to meet even ACICS’s historically lax standards — that could be a problem.  The new letter of credit level — $123,646,182 — is needed, the Department explains, as such letters “cover certain liabilities if a school closes at a time other than at the end of an academic period. Funds from the surety could be used to make refunds, provide teach-out facilities, and meet institutional obligations to ED.”

ITT Tech in recent years has been under investigation or sued by the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the attorneys general of at least 14 states, including Massachusetts’s Healey, who sued the company in April. A federal whistleblower lawsuit unsealed in January added more allegations of awful abuses, such as ITT admitting a blind student to a computer networking program that was unsuited to assisting the student, who dropped out within weeks and got stuck with the bill.

ITT denies it has done anything wrong and is contesting the pending charges.

Some experts already are opining that ITT won’t be able to meet this letter of credit demand, and that the company’s days are numbered.

Note that neither ITT nor ACI was thrown out of APSCU for bad behavior. ITT quit, and ACI just ceased to exist.  APSCU doesn’t seem to mind bad behavior.

ACI is gone, but every single day more students across the country enroll at ITT Tech and other predatory schools, including some current APSCU member schools, enticed by the taxpayer-financed grants and loans that the U.S. Department of Education continues to provide, along with the implied seal of approval from Uncle Sam.

Note, since a few people asked: I’m not in Orlando today; I’m in DC.

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This article also appears on Huffington Post