December 5, 2018

DeVos’s Absurd Attack On For-Profit College’s Sudden Shutdown

DeVos's Absurd Attack On For-Profit College's Sudden Shutdown

For-profit Education Corporation of America (ECA) announced today that it is shutting down nearly all of its campuses, leaving students out in the cold. The DeVos Department of Education harshly criticized the move. But that DeVos attack is itself travesty, because every step Betsy DeVos has taken as secretary has helped ensure more fiascos like ECA, where students and taxpayers lose as shady for-profit operators head for their next scam.

ECA has been operating some 75 campuses, under the brands Virginia College, Brightwood Career Institute, Brightwood College, Ecotech Institute, and Golf Academy of America, and currently enrolls about 20,000 students seeking careers in fields including health care, cosmetology, and, um, golf. Only one of ECA’s schools, online-only New England College of Business and Finance, will keep operating.

In September, ECA announced it would soon close 26 of its campuses, and in October, as first reported by Republic Report, ECA filed a lawsuit in federal court in Alabama against DeVos, seeking protection from its landlords and other creditors through a receivership, rather than bankruptcy. ECA also sought a declaration from the court that it would remain eligible for federal student grants and loans, the lifeblood of most for-profit schools; the law prohibits the Department from providing such federal aid once a school is in bankruptcy.

On November 5, the Alabama judge dismissed ECA’s lawsuit, ruling that, because ECA did not show that it has submitted a receivership plan to the Department or that the Department has rejected such a plan, there was no live controversy. Nine days later, however, ECA convinced a different federal judge, in Georgia, to appoint a receiver. But it appears that ruling did not give ECA enough reason to keep its schools open.

On Tuesday night, ACICS, the last-resort, discredited accreditor of troubled for-profit schools, suspended its approval of ECA’s Virginia College schools, placing their access to federal aid in dire peril.

In an email to staff Wednesday morning, according to Inside Higher Ed, ECA’s CEO, Stu Reed, cited new restrictions by the Department of Education on the company’s access to federal aid as a reason for closing. The Department had placed ECA schools on heightened cash monitoring, level 2, a status that delays the delivery of federal dollars.

The DeVos Department turned around and harshly attacked ECA. According to Politico, DeVos spokesperson Liz Hill released a statement saying it has been “in daily conversations” with the company about how students could finish their programs, but, “Instead of taking the next few months to close in an orderly fashion, ECA took the easy way out and left 19,000 students scrambling to find a way to finish the education program they started.” Hill called ECA’s move “highly disappointing.”

Hill is right that ECA is treating its students like dirt — the same students the company drew in with aggressive sales pitches about how the school cared about them and would transform their lives. An email from Stu Reed to ECA students today, similar to the message that went to staff, blamed the Department of Education and ACICS. It also, however, made clear that ECA itself has made no arrangements with other schools for students to finish their studies elsewhere, with Reed suggesting students “continue your career training by requesting your transcript and contacting local schools to determine transferability.” Translation: The students are on their own. And in fact, ECA credits are unlikely to transfer to quality schools.

But despite ECA’s disgraceful conduct, Hill’s attack on ECA is also a disgrace, because every step taken by the DeVos Department on for-profit college issues is one that will lead to more ECA-style debacles. Hill’s remarks would be comparable to Trump blaming ExxonMobil for global warming, at a time when Trump’s administration is doing everything possible to abandon controls on greenhouse gases.

DeVos has acted to cancel the Obama-era gainful employment rule, aimed at ending financial aid for the worst performing career and for-profit schools, those that consistently leave graduates with debt they cannot afford to repay.  ECA schools flunked the gainful employment test big time, which makes clear why ECA’s chairman lobbied so aggressively in the Obama years to kill the rule. With the gainful employment rule in place, more and more bad schools like ECA would lose eligibility for aid, preventing them from doing harm to more generations of students.

DeVos also has acted to gut the Obama borrower defense rule, which would have cancelled federal loans for students defrauded by their schools, barred schools from denying aggrieved students the right to sue them, and amped up requirements for financially troubled schools to ante up cash in the event of their demise. All of these measures would have helped deter the kind of bad programs that lead to turmoil and crushing debt for students. Finally the rule would have strengthened loan cancellation rights for students at schools that suddenly shut down — schools like ECA.

DeVos last month also reversed the Obama administration’s action to drop ACICS as a recognized accreditor — meaning an accreditor whose approval entitled schools to federal aid — despite overwhelming evidence that ACICS had been asleep at the switch as for-profit chains like Corinthian and ITT Tech deceived and abused students. That action signaled to accreditors that the Department did not expect them to demand quality and responsible behavior. (The fact that ACICS itself just dumped Virginia College may reflect that it feels the need to up its integrity given its rollercoaster ride — and the possibility that a new administration could come to power in 2021.)

So in the world created by Betsy DeVos’s abandonment of accountability rules, we could expect more debacles like Corinthian, ITT Tech, and now ECA, and more required taxpayer bailouts.  Meanwhile, the executives behind these scams can move on to take over another predatory school. Or they can join the DeVos Department as a senior official in charge of higher education policy.

Fortunately, the sloppy DeVos Department re-writes of the Obama rules, once they are finalized, may well be voided in court. More importantly, state attorneys general and non-profit legal and advocacy groups will continue to pursue for-profit college abusers. And, in part as a result of these efforts and diligent media reporting, more and more students have gotten the message that they can usually get a better career training deal at a community college.