Submitted by Paul Fain on August 25, 2016 - 3:20am
The U.S. Education Department on Thursday announced several new sanctions on ITT Technical Institutes, which experts said could push the large for-profit chain toward bankruptcy and closure. ITT is facing a wide range of federal and state legal challenges, in addition to scrutiny by its national accreditor, which believes the for-profit chain is unlikely to come into compliance with its requirements. Department officials said the “sweeping” sanctions were necessary to protect students and taxpayer dollars.
The new federal sanctions include moving ITT to a tighter form of financial oversight, dubbed heightened cash monitoring; a freeze on new students receiving federal aid; an increase in the amount of a required letter of credit to $247 million; and limits on the compensation of the for-profit’s executives.
“Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds,” John King Jr., the U.S. education secretary, said in written statement.
Ashford University cries foul on veterans' agency and California for meddling in Iowa's decision to yank the for-profit's GI Bill eligibility, and newly released emails show an Iowa official shared that view.
Brooks Institute, a for-profit visual arts college, has announced that it is shutting down in October. A letter on the institute's website cited "changes in economic and regulatory conditions." The Los Angeles Times reported that enrollment has dropped from 2,500 students in 2005 to 250 registered for this fall. Last week, The Ventura County Star reported last week that the president had been ousted and that a majority of board members had resigned. Last year, Career Education Corporation sold Brooks to gphomestay, a company that works with international students.
Former President Bill Clinton received $1.1 million in payments from the for-profit college operator Laureate Education in 2015, according to tax returns released by the Hillary Clinton campaign Friday.
Clinton also received $562,000 in payments last year from Dubai-based for-profit GEMS Education, which operates K-12 schools in multiple countries.
As Inside Higher Edreported in April, Democratic presidential nominee Hillary Clinton has promised to crack down on the for-profit industry. But Clinton and her husband have significant ties to the for-profit sector, chief among them the former president’s role as honorary chancellor at Laureate International Universities.
Bill Clinton was paid $16.5 million by the company between 2010 and 2014. He resigned from the chancellor position last year.
An investigation in The Portland Press Herald details questions being raised about the EDMC Foundation and its ties to the for-profit Education Management Corporation, known as EDMC. The article notes that many for-profit entities start tax-exempt foundations, but that the foundations aren't supposed to simply be arms of the business trying to advance the goals of the business. In the case of the EDMC Foundation, the article notes that strong ties between board members and senior officials of EDMC and also the purpose of the foundation. The EDMC Foundation provides scholarships, but only to students who attend EDMC institutions.
“If the Coca-Cola Foundation’s purpose was to give grants to people to buy Coke, that would not be seen by the IRS as an appropriate use of the charity,” said Robert Shireman, a former U.S. Department of Education official in the Obama administration, now a senior fellow at the Century Foundation and a prominent critic of for-profit higher education.
Some quoted in the article speculate that the foundation helped EDMC appear to comply with the 90-10 rule, which requires for-profit colleges to show that 10 percent of their revenues are coming from sources other than federal aid. EDMC officials denied any wrongdoing and said that the foundation's purpose was indeed charitable.
The for-profit chain ITT Technical Institutes, already facing scrutiny over its financial condition, may be in for tough times ahead. In a filing last week with the U.S. Securities and Exchange Commission, the company predicted that its new student enrollments in the last six months of 2016 will be 45-60 percent below levels of the same time period in 2015.