Notoriety and Now Closure

A for-profit college in New Jersey that made news five years ago for recruiting homeless people has become the latest to announce it will close its doors.

May 22, 2015

Just a few years ago New Jersey-based Drake College of Business was seeing record growth and opening its second location. But now the for-profit institution, with a campuses in Elizabeth and Newark, will close its doors.

The privately held education company witnessed a one-year enrollment growth of 400 percent from 2009 to 2010, but media reports exposed that the college was recruiting homeless people from shelters.

A month ago, the college informed the Accrediting Council for Independent Colleges and Schools that it will shut down on July 31 after more than 130 years in business. Formerly known as the Jersey City Business School, the college historically provided training for accountants and administrative assistants.

Drake is only the latest for-profit to close, following the collapse of the much larger Corinthian Colleges. Education Management Corporation is also phasing out some of its Art Institutes locations, and Career Education Corp. is closing or selling off most of its campuses except Colorado Technical University and American Intercontinental University.

"The school will remain committed to ensuring that the teach-out process goes smoothly and that all actively enrolled students have the opportunity to complete the program of study that they began at the school before July 31," says a statement from the college. "We plan to complete the teach-out process at the Newark and Elizabeth locations using our existing faculty and staff."

However, a formal teach-out plan has not been sent to Drake's accreditor, ACICS, although it has been in ongoing conversations with the college's owners to develop a plan that helps students, said Tony Bieda, vice president of external affairs for ACICS.

"We regret any of our institutions having to close. It's a huge displacement for our students," he said. "It's usually for financial reasons, but we hope they close their doors in an orderly manner that doesn't victimize students."

Representatives from Drake didn't return requests for comment.

ACICS requires Drake to send a formal plan before it closes. If it does not do so, the owners could face debarment, which would hinder their ability to operate another institution accredited by ACICS. Other accrediting institutions also may not allow the owners to operate in the sector, Bieda said.

"We're pushing them daily. We'd like to see everything as soon as possible so we can review it and give them guidance and support. They need help from ACICS to identify other institutions that we accredit or other accreditors which offer programs to Elizabeth and Newark to serve those students," he said.

Drake's accreditation would have continued to the end of 2017, however, that will also end once the college closes.

In 2010, Bloomberg reported Drake was one of a few for-profit colleges targeting homeless people as a group for recruitment and enrollment. The college also started offering potential students biweekly stipends of $350 to enroll, attend class and maintain a C average in 2008.

ACICS made a special visit to the college at that time to look into its recruiting practices. Eventually those issues were resolved, Bieda said. "At that point they agreed to cease any kind of outreach to social service agencies to seek new enrollment and focused on more traditional methods of recruitment and admitting students, and as far as I know they've been compliant in that regard."

A 2012 Senate Health, Education, Labor and Pensions committee report on Drake found in 2008 the college had the highest loan default rate of the 30 colleges the committee examined. That rate more than doubled from 17.9 percent for students entering repayment in 2007 to 40.1 percent for students in 2008.

During that time tuition also increased dramatically -- in 2012 a dental assisting certificate cost about $19,200, compared to about $4,370 in 2006.

"Nearly all of Drake's revenue is derived from federal taxpayer funds and most of the company's profit is funneled to the company's small group of shareholders. Moreover, Drake increased its tuition tremendously over the past few years," the committee report said.

Drake College of Business Enrollment, from National Center for Education Statistics
  Newark Elizabeth
2009 n/a 2,033
2010 3,088 2,661
2011 2,866 2,393
2012 2,780 2,216
2013 2,854 1,927


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