November 8, 2019

DeVos Cancels Loans for Students Her Department Helped Deceive

DeVos Cancels Loans for Students Her Department Helped Deceive

Under pressure from a federal lawsuit and congressional questioning, Secretary of Education Betsy DeVos announced this morning she is cancelling some student loans and restoring eligibility for federal Pell grants for about 1500 students who in 2018 attended the Art Institute of Colorado and the Illinois Institute of Art. As Republic Report was the first to reveal in 2018, the parent company of those schools, Dream Center Education Holdings (DCEH), publicly misrepresented that year that those schools were accredited, even though the schools’ accreditor, Higher Learning Commission, had informed DCEH that it had suspended accreditation pending further review.

Evidence obtained by the House Education and Labor Committee and others showed that DeVos’s Department knew of DCEH’s deception and facilitated it, by allowing federal loans and grants to continue to flow to the schools despite the lack of accreditation.

Yet in DeVos’s announcement today, via a Department press release, she follows the approach of her top higher education aide, Diane Auer Jones, blaming not DCEH or the Department but instead faulting the accreditor: “Students were harmed,” reads the press release, “by the Higher Learning Commission’s classification of the institutions in a newly developed and improperly defined accreditation status after January 20, 2018.” The press release insists that the two schools “were actually fully accredited” until they closed at the end of 2018. But, the release says, “Because HLC has required these two schools to note on student transcripts that credits and degrees earned during this period are from a non-accredited institution, students have been harmed as they seek transfer credit and employment elsewhere.”

DeVos and Jones love to blame students and others, while rarely blaming for-profit colleges or themselves for all the debacles and hardships they’ve created.

[UPDATE 11-09-19 8:00 am: HLC gave a statement to Education Dive saying that it “applauds” DeVos’s action but did not accept the shift in blame, because the Art Institutes schools “did not appropriately inform their students” that HLC had withdrawn accreditation as it “required and specifically instructed.”  HLC added that the accreditation status it applied to the school, contrary to the education department’s statement, “was not new” and had been in available since 2009.]

DCEH was a non-profit entity that acquired and, for about a year until it shut down, operated many of the colleges formerly owned by for-profit Education Management Corporation.

letter sent last month from House education committee chairman Bobby Scott (D-VA) to DeVos revealed that Scott has documents showing DeVos’s Department sent $10.7 million in taxpayer-funded student grants and loans to those two Art Institutes campuses despite it being clear to Department officials that the schools were not eligible for that federal aid.

The documents expose a plan relayed to DCEH on May 3, 2018, by a senior Department of Education official, Michael Frola, to keep federal aid flowing to the schools despite the loss of accreditation. DCEH had petitioned the Department to start treating all its schools as non-profits for purposes of federal regulations, which impose some particular requirements only on for-profits. But the Department had not yet acted on the petition. One of those regulations permits the Department to send student grants and loans to schools awaiting accreditation, but only if they are non-profit. So the Department, via letters to DCEH from Frola, committed to retroactively, and temporarily — in advance of final approval — treat those two Art Institutes campuses as non-profit.

Scott’s letter to DeVos noted that there is no evidence that the Department ever diligently reviewed the evidence to determine if the two schools actually met the Department’s standards for non-profit status. Indeed, in February 2019, as DCEH was completing its meltdown, Diane Jones, who has mismanaged Department actions and policy on for-profit colleges, determined that DCEH schools did not meet those standards.

Scott’s letter also details, as Republic Report has previously noted, that the timeline of events casts severe doubt on Jones’ claim that she was not aware until July 11, 2018, of DCEH’s false statements about the schools’ accreditation.  The facts also undercut Jones’ assertion in sworn testimony to Congress that the Department’s 2018 decision to permit retroactive accreditation of colleges was unrelated to the Dream Center’s predicament.

After granting DCEH such special favors, Jones soured on the operation, eventually turning over the surviving DCEH schools to another non-profit group linked to for-profit interests.

The National Student Legal Defense Network, which already was been pursuing litigation against DCEH for lying to students about the campuses’ accreditation issue, last month filed a new lawsuit against DeVos for her Department’s alleged role in deceiving the students via the scheme exposed in Scott’s letter.

DeVos also announced in the press release that she will extend by one month the window of eligibility for closed school loan discharges for some 300 students at another 24 DCEH schools.

But the limited loan relief announced by DeVos actions does not come close to making the former DCEH students whole; they do not come close to what Democratic Senators have asked her to do. As to the Colorado and Illinois Art Institutes students, DeVos is cancelling only those loans borrowed between Jan. 20, 2018, through the end of that year, which for many is only a fraction of their student debt.

The Department has posted information for students at and