October 26, 2022

Education Department Restricts Cash Flow to Florida Career College

Education Department Restricts Cash Flow to Florida Career College

The U.S. Department of Education has placed troubled for-profit Florida Career College (FCC) on Heightened Cash Monitoring 2 (HCM2), a restrictive status under which a school must request reimbursements from the Department for student financial aid, rather than getting payments in advance. The decision was recently made public through the Department’s quarterly filing of schools on HCM status, in a spreadsheet that provides as the rationale for the action regarding FCC the words “Program Review.”

Republic Report has obtained a letter, dated July 13, sent from the Department’s Federal Student Aid office to Fardad Fateri, the CEO of International Education Corp., which owns FCC as well as other colleges. The letter, as we received it, contains no explanation for the decision. One paragraph is redacted. 

The Department of Education explains on its website that schools can placed on HCM2, or the less restrictive HCM1 status, “as a result of compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school’s administrative capabilities, concern around a school’s financial responsibility, and possibly severe findings uncovered during a program review.” 

As the Department’s letter to FCC notes, federal regulations bar schools on HCM2 status from adding new programs or campuses without approval by the Department.

Florida Career College has ten campuses in Florida and two in Houston, Texas. The school offers programs in business, health care, IT, cosmetology, and HVAC repair. Last year, FCC received $99.1 million in student aid from the U.S. Department of Education, accounting for 87 percent of its total revenue, and got even more taxpayer money from the U.S. Department of Veterans Affairs to enroll student veterans. The school was awarded another $17.3 million in emergency federal aid under the 2020 COVID-19 relief bill. 

In April 2020, FCC was sued by former students for targeting Black people for programs that buried students in debt. The students are represented by lawyers at the non-profit Project on Predatory Student Lending.

After I wrote about the lawsuit, numerous former and current employees told me the school has engaged in deceptive and fraudulent practices and would, as one put it, “enroll anyone with a pulse” to get federal aid dollars. Another ex-employee called Florida Career College “the most corrupt institution I have ever seen in my life.” 

“Once the student is in class,” another former employee told me, “they can’t keep up with college level education and most fail out… Leaving thousands [of dollars] in debt and nothing to show for it.”

Our 2020 articles focused on FCC’s Orlando campus. According to former employees there, FCC’s recruiters found homeless people in strip mall parking lots and lured them to campus by giving them hot dogs. They tricked others into campus visits by claiming they were offering job interviews.

The former employees told me FCC admitted students whose physical and intellectual disabilities prevented them from doing the jobs they trained for, including a student whom the school enrolled in a dental assisting program even though she was legally blind and couldn’t adequately see inside patients’ mouths. The school also enrolled students whose convictions for violent crimes made them ineligible for positions they sought; students who didn’t speak English, even though the programs were only in English; and high school dropouts who couldn’t pass entrance exams without the school helping them cheat, which, according to multiple employees, FCC did on a regular basis.

Some of the former employees who spoke with me have subsequently spoken with federal investigators.

In some past instances, a Department of Education action to move a college to HCM2 status has soon been followed by a school collapse — for example, Independence University last year and the Education Corp. of America schools in 2018. Some for-profit colleges have thin financial reserves, with money readily spent on advertising, student recruiting, executive salaries, and owner profits. Such schools depend on the cash, mostly federal taxpayer dollars, generated from enrolling new students in order to keep operating. These schools may feel compelled to, or choose to, quickly shut down if they lose access to the federal money up-front.

It’s not clear whether FCC is struggling under HCM2. International Education Corporation, a privately-held company which also runs the chains UEI College, United Education Institute, U.S Colleges, and Sage Truck Driving Schools, did respond to my request for comment.

Since June 2021, FCC has been on “Notification of Apparent Deficiency” status with its accreditor, the Council on Occupational Education (COE). COE has provided this explanation for placing FCC on this status: “Non-compliance with conditions, standards, and/or criteria of the Commission.” In 2020, after I published my first report on FCC, COE’s executive director, Gary Puckett, told me the agency was investigating issues at the school. In October 2021, the U.S. Department of Education informed COE that it had one year to improve its own compliance with Department regulations, including that COE “must demonstrate that it has meaningfully engaged with its obligations … to enforce its accreditation standards with respect to complaints of fraud and criminal activity at Florida Career College.”

Depositions and declarations filed last year in the students’ lawsuit, including from some of the same former FCC employees who spoke with me, revealed more abuses at the school, such as: FCC recruiters cold call people who may have been looking on job training websites and have never expressed interest in attending the school; FCC invited some prospective students for “job interviews” when the real intent was to enroll them in the school; and prospective students who did not want to enroll were pressured into talking with at least three FCC representatives before they could leave campus. FCC’s Jacksonville admissions director, according to one former employee, would pressure black students to enroll, but would provide white students recommendations for other options.

A former FCC loan collections officer declared in a case filing that: FCC’s financial aid process during enrollment was rushed, and a high percentage of FCC students did not understand the debt they were taking on; FCC collections staff were paid bonuses based on how much they collected from students; the purpose of FCC’s high-pressure collections process was to help FCC meet its legal obligation to maintain at least 10 percent of its revenue from sources other than federal aid; and FCC faculty falsified class attendance records, vouching for students who were not actually there.

In the Florida lawsuit, FCC has taken advantage of a regulation, imposed by Trump education secretary Betsy DeVos, allowing for-profit colleges to resume their predatory practice of denying aggrieved students the right to sue in court for abuses, and forcing them into arbitration proceedings, which tend to favor institutions. Over the objections of the students’ lawyers, the federal court in Florida has upheld the forced arbitration clause in FCC’s enrollment agreement with students and sent the case to private arbitrators. A pending regulation by the Biden Department of Education would restore an Obama-era ban on these mandatory arbitration clauses for colleges receiving federal aid. For-profit colleges have consistently forced students to give up their rights to sue, while nearly no other colleges have done so.