Federal Aid Cut to For-Profit Law School

The U.S. Department of Education announced Monday that it would block federal student aid funds to Charlotte School of Law as of Dec. 31, a major blow to the viability of the for-profit institution.

The American Bar Association placed the law school on probation last month, citing its failure to comply with standards that a program only admit applicants likely to succeed and pass the bar exam.

The department noted Charlotte's failure to comply with its accreditor's standards as well the department's regulations. And it said the law school had made substantial misrepresentations to students about the program's accreditation and the likelihood of graduates to pass the bar exam.

“The ABA repeatedly found that the Charlotte School of Law does not prepare students for participation in the legal profession. Yet CSL continuously misrepresented itself to current and prospective students as hitting the mark,” Under Secretary of Education Ted Mitchell said in a statement. “CSL’s actions were misleading and dishonest. We can no longer allow them continued access to federal student aid.”

The law school received $48.5 million in federal student last year, mostly from federal student loans. The program has until Jan. 3 to submit evidence to dispute the findings of the department.

A statement released by the law school to The Charlotte Observer said that the institution had "no warning" that the action was about to be taken, nor an opportunity to discuss the penalties with federal officials. The statement added that the law school would respond to the federal complaint and "protect our students."

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New Federal Loan Counseling Experiment

The Department of Education Thursday announced an experiment to find the best loan counseling services for student borrowers.

The department asked 35 public two-year and 14 public four-year institutions to test the effectiveness of required loan counseling for student borrowers. The announcement follows remarks from Under Secretary Ted Mitchell over the summer that the department was considering giving a handful of institutions the ability to require loan counseling using its experimental sites authority. Mitchell told attendees at the National Association of Student Financial Aid Administrators conference that the department wants to understand not just whether required loan counseling is effective but what kind of counseling is most effective -- whether that means in-person counseling or regular electronic communication.

The department has advised colleges and university financial aid offices that after completing entrance counseling they cannot require students to receive further guidance as a condition of taking out additional federal direct student loans.

Half of the 100,000 students participating in the experiment at the invited institutions will be placed in control groups, while another half will be assigned to receive additional forms of counseling chosen by the institution, according to a release from the department.

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Commission Report on Higher Education Financing

The University of Virginia's Miller Center and the affiliated National Commission on Financing 21st Century Higher Education on Wednesday released a report making the case for how to best fund increased college credential production in the United States.

The Miller Center in 2014 created the commission with funding from the Lumina Foundation to develop recommendations for long-term, sustainable financial models for higher education. The commission, which was led by a bipartisan group of former lawmakers and college leaders, generated 10 white papers by higher education experts. For example, two of the papers called for more state support of public higher education to go to open-access colleges and need-based aid.

The commission's final report drew from the papers. It included nine recommendations:

  • Increase federal and state institutional support;
  • Enhance state revenue to support higher education;
  • Stimulate the development and implementation of low-cost education delivery models;
  • Encourage productivity in the postsecondary system;
  • Create incentives for students to graduate on time;
  • Help students and their families make better decisions;
  • Increase and reform financial aid to target low-income students;
  • Develop additional private funding;
  • Take advantage of private-sector programs.

"While the U.S. higher education system is still the envy of the world, the nation is clearly at a major crossroads given the increased income inequality and the fact that many workers feel left behind economically," Mike Castle, commission co-chair, former Republican governor of Delaware and former U.S. congressman, said in a written statement. "It is our hope that national and state policy leaders gain valuable insights and policy direction from our work to build stronger federal, state, business and higher education partnerships focused on higher degree and certificate attainment rates."

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Activists and borrowers call on Obama administration to provide debt relief to defrauded students

Education Department officials say they will work through Jan. 20 to review claims of defrauded students, but borrowers and advocates call for more urgency.

Education Secretary Drops Recognition of Accreditor

In an expected move, John King Jr., the U.S. secretary of education, on Monday made the Education Department's final decision to terminate its recognition of the Accrediting Council for Independent Colleges and Schools (ACICS). The council is a national accreditor that oversees 245 institutions, many of them for-profits, which enroll roughly 600,000 students and collectively received $4.76 billion in federal aid last year.

ACICS had accredited many Corinthian College locations as well as ITT Technical Institute. King, citing "pervasive compliance" problems, followed through on a federal panel's decision to nix the council for failing to protect students and taxpayers from fraudulent and underperforming colleges. The council had appealed that decision, which the department backed previously and confirmed with King's decision this week. In a written statement, ACICS said it would "immediately file litigation seeking injunctive and other relief through the courts."

The colleges accredited by the council have 18 months to find a new accreditor or risk losing access to federal aid. Many have been scrambling to be accredited by other agencies, particularly by the Accrediting Commission of Career Schools and Colleges.

In the meantime, the department on Monday said it was adding new conditions for ACICS-accredited colleges to remain aid eligible. Those measures include monitoring, transparency, oversight and accountability requirements. The department said the conditions "establish triggers tied directly to milestones in the accreditation process to ensure that institutions not on track to receive accreditation from a federally recognized accrediting agency within 18 months are subject to progressively stronger student and taxpayer protections."

Council-accredited colleges have 10 days to agree to the new conditions or they will no longer be able to receive federal aid. The colleges must submit teach-out plans as part of the department's terms.

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Feds Announce New Debt Collection Contracts

The U.S. Department of Education last week announced the seven companies it awarded new contracts for the collection of debt from federal financial aid. The seven companies, listed below, were selected from 48 bids, according to the publication insideARM.

Last year the department said five debt-collection companies had misrepresented borrowers in an attempt to get loans out of default. None of those five companies were awarded new contracts. The seven that did are Financial Management Systems Investment Corp., GC Services Limited Partnership, Premiere Credit of North America, the CBE Group, Transworld Systems, Value Recovery Holding and Windham Professionals.

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Summer Pell Left Out of Congressional Spending Bill

A House appropriations bill released this week leaves out new funding to restore summer Pell Grants, disappointing advocates who made that item a priority heading into the lame-duck session.

Congress must approve a new stop-gap spending bill by Friday to avoid a government shutdown.

Restoring year-round funding of Pell Grants has been a goal of both parties since an agreement in 2011 to cut summer Pell over funding shortfalls. Students can receive up to $5,815 annually in Pell funding. With a $7.8 billion surplus in the program, higher education stakeholders and congressional Democrats had called on appropriators to use the lame-duck session to increase the value of the grants and restore funding for summer semesters.

Jonathan Fansmith, director of government relations at the American Council on Education, said the group supported restoring summer Pell but wasn't surprised to see it left out of the continuing resolution posted by House appropriators. And he said because the bill approves spending through April 28, it won't preclude lawmakers from adding money for summer Pell Grants in another spending bill next year.

The continuing resolution also includes $872 million for the 21st Century Cures Act, including $352 million for the National Institutes of Health Innovation Account. Higher ed groups including the Association of Public and Land-grant Universities and the Association of American Universities praised the passage of the Cures Act for its support of research and innovation.

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USA Funds to End Student Loan Guarantee Business

USA Funds, which was one of the country's largest guarantors of federal student loans when banks originated most such loans, announced Wednesday that it would transfer its guarantor operations to Great Lakes Higher Education Corporation and focus fully on its newfound role as a funder of college completion-related initiatives. Great Lakes will take over management of the nearly $50 billion in federally guaranteed student loans that remained in USA Funds' portfolio since a 2010 law effectively ended the bank-based Federal Family Educational Loan Program. Great Lakes has absorbed the portfolios of several other loan guarantors who have sought to wind down their involvement in lending.

As part of the new arrangement, Great Lakes will make grants to USA Funds to help support its advocacy work, which focuses on student completion, college value and other topics. Like other former guarantors, USA Funds has a sizable pot of money from borrower fees that it amassed during its time in the loan program, which consumer advocates have criticized.

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Education Department Blocks Aid for 2 For-Profits

The U.S. Department of Education said Tuesday it would block for-profit colleges Globe University and the Minnesota School of Business from receiving additional federal student aid.

As of Dec. 31, students will no longer be able to use funds from Pell Grants or federal direct loans at those institutions, which are jointly owned. The Federal Student Aid Enforcement Unit found that the programs committed fraud involving Title IV funds and misrepresented their criminal justice programs as well as the ability to transfer their credits to other colleges.

Globe enrolls about 1,000 students at 10 locations across the Midwest, and Minnesota School of Business enrolls about 700 students in Minnesota.

“Globe and MSB preyed upon potential public servants -- targeting those with a sincere desire to help their communities,” Under Secretary of Education Ted Mitchell said in a written statement. “These institutions misrepresented their programs, potentially misleading students, and abused taxpayer funds, and so violated federal law, which is why we removed them from the federal student aid program. This is a sober reminder that not all institutions deliver on their advertised promises.”

The department blocked access to Title IV aid for new students enrolling at ITT Technical Institutes in August -- a serious blow that was followed the next month by an announcement that the for-profit would close its doors at campuses across the country.

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GAO report finds costs of loan programs outpace estimates and department methodology flawed

GAO report faults Education Department for serious ‘shortcomings’ in estimating cost of income-based repayment programs, giving new ammunition to congressional Republicans.


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