$31 Million Court Win for a For-Profit College

Federal judge backs finding that an accreditor misled the Education Department about a now-closed for-profit institution, and relieves most of the college's debt.

March 24, 2016

One piece of inaccurate information precipitated Kentucky-based Decker College's closure more than 10 years ago. That misinformation, provided by Decker's accreditor to the U.S. Department of Education, about the status of Decker's distance education program, led the department to terminate the for-profit college's participation in the federal student aid program. The department also determined that Decker owed more than $32 million in federal aid.

But last week, an administrative law judge ruled that officials representing the former college would no longer have to pay more than $31 million back to the department because the information from the Council on Occupational Education was "factually inaccurate."

"The department took, on its face, the statement of the accreditor and acted on that statement with the expectation that an action of an accreditor was true," said Mike Goldstein, a partner and higher education legal expert at Cooley law firm, which is representing the trustee of the Decker estate, who represents the students and former employees . "This wasn't just a letter from the head of an agency. This was a determination made by the COE commission that was not just false, but also resulted in the cataclysmic collapse of an institution and a loss to a great many people."

That letter from the accrediting council to the Office of Federal Student Aid claimed that Decker's building trade and construction trade programs were not accredited to be delivered through distance education.

"With such a very significant amount of liability at issue and such significant results flowing … it is troubling that FSA relied exclusively on this letter as a scant basis for imposing a $31 million liability, and that FSA chose not to conduct any examination of the facts and circumstances behind the letter from COE," the judge said in his decision.

Officials with the occupational education accreditor did not respond to requests for comment. Officials at the Federal Student Aid office declined to provide comment on the case.

"The strangest thing is that COE appears to have given the department incorrect information about what colleges it accredited were actually approved to do," said Ben Miller, senior director for postsecondary education at the Center for American Progress. "Part of this might be because the rules on distance education were changing right around then. But a lot of this craziness appears to be because the accreditation agency could not fulfill a basic requirement of an oversight entity -- know who you approved and for what."

But Decker still owes some money to the department. Some students, for instance, received additional grant money earlier than they should have. The judge, in his decision, advised the department and Decker to reach an agreement based on formulas used during the case.

"The money for students in distance education does not have to be repaid by Decker," Miller said. "By contrast, the money owed for students who dropped out and were not tracked properly is reduced. So overall Decker still looks like it owes something, just not $30 million."

The college did have other problems beyond the accreditor. In 2005, Decker was facing an audit from the department, and state and federal agencies were examining possible wrongdoing.

"There were other issues that in the ordinary course would've been resolved in a program review and Decker would probably still be around," Goldstein said, adding that Decker has sued the accreditor.

Although Decker went out of business, some students and vendors are still owed money, Goldstein said, adding that the institution submitted more than $11 million in reimbursements to the department under heightened cash monitoring.

Goldstein said he's hopeful the department won't appeal the decision and will work with Decker's representatives to resolve the situation.


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