Independence U. Lays Off Staff, Says Feds Stopped Aid
The Center for Excellence in Higher Education, operator of Independence University, has informed its staff that “most” employees will be laid off in the next few months. By messages sent on July 20, CEHE’s interim CEO Paul Gardner told staff that the U.S. Department of Education has placed the school on Heightened Cash Monitoring 2, a restrictive status under which a school must request reimbursements from the Department for student financial aid, rather than getting payments in advance. Gardner told staff the Department has not provided CEHE with any cash since May.
According to Gardner, there are still some 7000 students enrolled at the mostly-online CEHE schools. He says that CEHE “continue[s] to provide education and services” to these students “without funding.”
Taxpayers have provided perhaps $2 billion or more in federal student grants and loans to the CEHE schools over the past decade.
A Department spokesperson confirmed to me this afternoon that the Department has placed the CEHE schools on HCM2.
In his message, Gardner called the recent developments “disheartening and frustrating.” Certainly that must be the case for CEHE’s thousands of employees, many of them highly dependent on their paychecks from the company — and some of whom have provided me with details in the past few years about deceptive recruiting, shady financial aid practices, poor educational quality, and other abuses at the schools.
Numerous employees also received from Gardner individually-addressed messages informing them that their employment will end in mid-September, plus a nine-page set of “Layoff FAQs.” CEHE laid off another group of employees, seemingly concentrated among its admissions / recruiting staff, around July 8.
CEHE is currently appealing a devastating judgment issued last year by a Colorado state trial judge that the company, and its leaders Carl Barney and Eric Juhlin, had engaged in deceptive practices against its students. It also has appealed an April decision by the school’s accreditor, ACCSC, to end recognition of the school — a decision that, if upheld, would end access to federal aid. Meanwhile, the Department of Education suspended CEHE’s CEO, Juhlin, from contracting with the government, which led him to step down in early May.
CEHE also is under investigation for student loan abuse by the Consumer Financial Protection Bureau and is being sued for fraud by the U.S. Justice Department.
Although none of these matters has been finally resolved, CEHE’s long run of predatory behavior, leading to financial ruin for many students, may finally be ending.
CEHE stopped enrolling new students in April. In his message last week, Gardner directs staff not to advise current students to withdraw from the school “as new information is coming that will prepare the students to make an informed decision.”
Gardner says CEHE is working to see that all their students “are properly provided an education that meets our standards.”
Meanwhile, CEHE’s ultra-wealthy founder, Carl Barney, is nowhere to be found, other than continuing to spout his right-wing political views and muse about his idol, Ayn Rand, on his personal blog. People who have tried to reach Barney to discuss CEHE’s collapse have been told by his office that he is traveling, out of the county, and away for a long time.
CEHE’s layoff notifications suggest that closure of its schools may be imminent. If that happens, students who withdraw now may end up eligible for a “closed-school discharge” that would cancel some federal student loans. The situation raises questions about whether CEHE and / or the Department of Education has a duty now to inform students of their closed-school discharge rights.
In part because CEHE, and officials like Barney and Juhlin, might end up with liability for the costs of closed-school discharges, CEHE might be motivated to negotiate a “teach-out” agreement with another predatory college — perhaps one that would pay CEHE for the new students. CEHE’s shutdown of its discredited CollegeAmerica chain last year was marked by apparent efforts to avoid closed-school discharges for those students — by offering students refunds, or discounts to enroll at Independence University or Stevens-Henager College, another CEHE school.
I am hopeful that the Biden Department of Education won’t allow CEHE to compound the hardships of its students by sending them to another high-priced, low-quality school. I also hope the administration won’t repeat the disastrous mistakes of previous administrations that sought to prevent the closure of toxic, predatory schools by pushing out the old owners and finding new ones to take over, as was the case with Corinthian and EDMC/ Dream Center, or approving a merger with a state school whose leaders made an ill-advised decision, as happened with Kaplan-Purdue and Ashford-University of Arizona. In the case of CEHE, a successful transfer would also require ACCSC or another agency to restore the school’s accreditation.
Closing schools can cause upheaval for students and staff, and costs for taxpayers, but in the long run, in the case of schools, such as those run by CEHE, that have long engaged in deceptive and predatory behavior, it is the right thing to do. The Department should be developing short- and long-term plans to find legitimate schools, such as community colleges, that might accept as transfers students who are displaced by the collapse of predatory schools like Independence University and want to continue their studies.
Officials at CEHE have not responded to a request for comment.
An email sent to employees from the Independence University registrar says the school, “per Eric Juhlin,” will close August 1, and students will be given options including transferring “to one of our teach out partners.” Staff are instructed not to tell students any of this news yet. The registrar tells employees that many of their jobs will end August 1, including employees who were previously told their jobs would go until September 18.
UPDATE 07-30-21 10:30 am:
CEHE interim president Gardner sent a letter to students on July 28 notifying them that all of CEHE’s schools, including Independence, were closing down August 1 and that “we will begin a process of winding down our operations through a process called a ‘teach-out.'” He added, “we have entered Teach Out Agreements with a regionally accredited institution of higher education that will permit most currently enrolled students to complete the same or similar programs online. We are in the process of identifying any on ground options that may also be available. Staff will be contacting you and holding a series of meetings to help explain your options and answer your questions. After those meetings, you will be asked to select an option and sign a document attesting to your choice. If after meeting with the staff, you
decide not to complete your degree by accepting one of the transfer options, you may withdraw.” Gardner continued, “It is our sincere hope that you decide to select the transfer option so that you can complete your education, graduate, and earn your degree.”
In addition to Gardner pushing the students to transfer to CEHE’s selected school, he did not mention that students might be able to exercise their right under federal law to have their loans forgiven via a closed-school discharge.
A colleague called the number of the Independence University website on July 29 asking to enroll and was told the school closes August 1, 2021. She asked why, and the person answering said, “We lost our accreditation and we tried to fight it and the fight didn’t go to well and the feds pulled our money.” My colleague asked the IU rep if she was aware of the consumer protection lawsuit the Colorado attorney general brought against CEHE, and she said she had never heard of it.
The Independence representative told my colleague that current IU students can do a teach out at Miami International University of Art & Design for those subjects and South University for nursing and business and that both schools will take all credits earned at IU.
I personally don’t think that transferring to one of those two schools would be a great outcome for many Independence students. Miami International and South are both schools formerly owned by EDMC, then Dream Center Education Holdings, and now operated by a New York private equity firm, Colbeck Capital Management. Like Independence and other CEHE schools, these schools have historically been characterized by high prices, high dropout rates, and crushing debt burdens for former students. Colbeck’s takeover of the schools in 2019 was forced by Betsy DeVos’s lieutenant Diane Auer Jones, a former for-profit college executive, and was marked by concealment of the extent of Colbeck’s involvement, which Republic Report soon exposed.
On various Facebook groups, Independence students are waking up to their predicament. One of them posted this article and commented, “Please read the article and pass it on to people not in this group. Independence lost funding due to fraud. They are selling us to the teach out schools to bail them out. Consider withdrawing and going to a different school. The school they are transferring us to is a preditor [sic] school as well and has a worse graduation rate than Independence. I have researched our options and they are not good.”
UPDATE 07-30-21 1:20 pm:
A CEHE employee sent me a supplemental communication sent to students, also dated July 28. The employee pointed out to me that this communication does advise students that they can withdraw and potentially receive a refund as applicable under federal or state law.
At the same time, this second message identifies South University as “our exclusive teach out partner” and promotes the alleged benefits of transferring to South.
UPDATE 07-30-21 2:30 pm:
The Department of Education has sent a letter, dated July 29, to CEHE. The Department says it has information from students suggesting “that CEHE is not providing students complete information regarding all the options. available to them…” The Department notes that students may be eligible for a closed school discharge and are not obligated to accept a teach out. The Department also raises concerns that students are getting “pressured” by CEHE to transfer to Miami International University of Art & Design and South University and suggesting that these are students’ only transfer options. The Department says that transfers to those schools could “position CEHE to profit from student transfers.”
The Department directs CEHE, within 24 hours, to send to the Department, for its approval, a draft of an “updated, accurate, and complete communication for impacted students.” The Department warns that if CEHE fails to do so, “we reserve the right to take further action, including alerting state Attorneys General of potential unfair, deceptive, and abusive acts and practices.”
As the Department’s letter suggests, and as I predicted above, CEHE is managing its collapse in the same spirit of anti-student selfishness and greed that has marked the operation of Carl Barney’s schools for many years. To its credit, the Department of Education, at long last, is taking a stand to protect students against this predatory company.
UPDATE 7-30-21 6:25 pm:
The Department of Education has sent a notice to CEHE school students informing them that it “will provide you with guidance about your options as soon as possible.” The notice says options may include closed school loan discharges or transfer to another school. It adds,
“You may have received information about transfer options from your school. Please note that oversight officials have not approved the transfer options currently being offered to students, and you may have other options. Further, if you transfer credits from your program of study, you may not be eligible for a closed school loan discharge.”
Rich Cordray, Federal Student Aid Chief Operating Officer at the Department, provided this statement:
Federal Student Aid will continue to hold institutions accountable and rigorously investigate predatory behavior like that of CEHE. Since April, the Department has been conducting a review of CEHE. As a result, the Department placed greater restrictions on CEHE’s receipt of federal aid for the last several months. The Department has recently completed its review, and was preparing to issue its findings and take action on CEHE’s status. CEHE’s decision this week to close its schools appears to have been intended to circumvent the issuance of formal findings by the Department. We are committed to supporting students during this challenging time. We have already emailed students to help them understand they do not have to be rushed into accepting a transfer to another school of CEHE’s choosing. We continue to work with our oversight partners in the Federal and State governments, and in the coming days, we will post information on StudentAid.gov/closures and hold live informational webinars for students.
On Wednesday, August 4, at 4 pm ET, the National Consumer Law Center and Legal Aid Foundation will hold a webinar for CEHE students to explain their rights. Register here.
UPDATE 07-31-21 7:00 am:
After a tweet from Cordray offered advice to CEHE students, Juhlin posted a late-night response (that features his signature “misuse” of air quotes):
Misleading! The Truth: Department Officials “rejected” viable transfer options for students. So the Department would rather see students “on the street” than being able to finish their degree programs!! DoE cares about politics NOT students.— Eric Juhlin (@juhlin2014) July 31, 2021
UPDATE 07-31-21 5:50 pm:
On Friday night, CEHE’s Paul Gardner sent a new message to students. It does not seem responsive to the concerns stated by the Department of Education in its Thursday letter. Gardner tells the students, “Many of you chose to continue your education with South University or Miami International University of Art & Design. We applaud your choice!” He then provides instructions for transferring to those schools, telling students in bold letters that to complete the transfer, “You must take action.” There is no mention of student options to seek transfer to other schools, or to withdraw and seek loan discharges.
UPDATE 08-01-21 4:20 pm:
Independence staff and instructors are still, today August 1, individually and aggressively pushing students to enroll at South University, even though the Department of Education warned CEHE against misleading students regarding their options. Is CEHE offering incentives for staff to push students to South? Or misleading the staff about the quality of South and available options for students? When will this scam be halted and students protected?
UPDATE 08-02-21 12:50 pm:
Senators Dick Durbin (D-IL), Elizabeth Warren (D-MA), and Sherrod Brown (D-OH), wrote to Secretary of Education Cardona this morning, calling on him to “take immediate action” to assist CEHE students. The letter cites our reporting and states concern “that CEHE and its
staff are steering students toward questionable options and misrepresenting students’ deadlines for decisions on transfer.”
UPDATE 08-02-21 2:30 pm:
A trusted colleague reports, “I just called IU ( 801) 407-5843 and spoke to a student advisor named Brian. I asked him if students were entitled to a student loan discharge and he said
NO!!! He went on to say that they have partnered teach out schools and that is the only option for students. I told him that I had seen a public document where the DOE told the schools that they had to inform the students about getting their loans discharged. He said…..WE are only given the information that they are to transfer and they cannot get their loans discharged!!!”
UPDATE 08-02-21 2:35 pm:
CEHE CEO Paul Gardner has emailed staff that the company is terminating “all but a group of essential employees,” effective today. Employees say that breaks CEHE’s commitment, and, they contend, obligation, to pay them for six more weeks. Gardner tells employees that the Department of Education refused CEHE’s request to approve the sale of assets; he claims that CEHE is now out of cash to pay the employees as they expected to be paid.
Maybe Gardner should check in with Carl Barney.
Gardner’s message added this comment, “There is and will be a lot of negative press and social media regarding what has happened to this organization. Unfortunately, many critics and think tank groups that failed to recognize the value of career education will celebrate a victory for what is in effect a defeat for almost 7,000 students. They do not understand the damage they have done as they congratulate themselves for doing ‘what was right’ in their eyes.”
UPDATE 08-02-21 5:01 pm
South University is holding a webinar right now to introduce itself to Independence students. Matt Gavlik of South is speaking (even though the GoToMeeting tag identified him as “Ken Baker”). He says “thousands” of students have applied to transfer to South in recent days.
As previously noted, on Wednesday, August 4, at 4 pm ET, the National Consumer Law Center and Legal Aid Foundation will hold a webinar for CEHE students to explain their rights. Register here.
UPDATE 08-02-21 7:05 pm:
One CEHE staff member wrote to me today, “So many of the students that were wrongfully recruited were in situations that were heartbreaking, below poverty, rotten teeth, no transportation and they wanted a fruitful education. I simply can not believe that all of the blame is being placed on the DOE and no responsibility for mismanaged corporate funds, greed or their lies is being taken.”
The Department of Education has posted a fact sheet for students who attended CEHE schools.
The Independence University website now says the school has no teach out schools, only “transfer schools,” institutions “that MIGHT take the students’ credits.” South and Miami International are in that category, but so are other schools, mostly for-profits.
I should also have noted a while ago that the FAQs that Independence posted for students informs them that there will be no forgiveness for the high-interest EduPlan private loans that CEHE made directly to students.
The Colorado judge found that the operation of EduPlan loans was a core part of CEHE’s deceptive practices against students. The EduPlan loans are managed by a mysterious company called AR Management. It looks like, amid its collapse, CEHE will continue to make collecting these loans a priority — one more sign of the greed at the core of the company.
CEHE has written to at least some employees saying it doesn’t have the money to pay severances promised. They blame the Department of Education, and they warn employees that suing “will not result” in payment. Classy. Again, maybe Carl Barney, who took hundreds of millions out of his “non-profit” schools, could pay to keep the financial promises to employees, instead of him paying out show-off “prequests” to friends who will jump through his little hoops.
CEHE tells its former students: (1) there will be no more of the stipends that students expected for living expenses, because, they claim, it’s the Department of Education’s fault; and (2) there will be no EduPlan loan forgiveness; you have to pay us back.
You stay classy, CEHE.