Ed Dept accuses college operator of selling enrollments when shutting down

by Jeremy

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Dive Brief: 

  • The U.S. Department of Education raised concerns last week that a college operator that is closing its locations isn’t giving students enough information about their options to transfer to other institutions or receive student loan discharges. 

  • The department outlined the potential issues in a letter to the CEO of the Center for Excellence in Higher Education, or CEHE, a Utah-based nonprofit that ran several colleges but is shutting down operations, The Chronicle of Higher Education reported

  • CEHE struck an agreement with two universities that allows the college operator to profit if students transfer there, and students are being pressured to attend them, according to the letter. 

Dive Insight: 

CEHE’s management of Independence University, California College San Diego and the CollegeAmerica chain has long been fraught. The schools faced several accusations that they were misleading students and delivering poor student outcomes. The Obama administration’s Department of Education fought against allowing the colleges to convert to nonprofit status, but the department granted the conversion in the Trump era.

The accreditor for CEHE’s colleges said in April it was withdrawing Independence University’s accreditation because it was failing to demonstrate acceptable student outcomes. The decision came after a Colorado judge last August ordered the CollegeAmerica chain to pay $3 million for promising students job opportunities and earnings that its programs couldn’t deliver.

Rich Cordray, chief operating officer of the Ed Department’s Federal Student Aid office, said in a statement that the agency had been looking into CEHE since April and was preparing to issue its findings. “CEHE’s decision this week to close its schools appears to have been intended to circumvent the issuance of formal findings by the Department,” Cordray wrote. 

CEHE was closing all of its locations by Sunday, according to the Education Department’s letter. Affected students can either enroll in another institution that agrees to take them or apply for a closed school loan discharge, an option that will forgive their debt if they withdrew during a closure or within a set period of time before it. 

However, the Education Department says it learned about a concerning arrangement between CEHE and two for-profit schools, South University and the Miami International University of Art and Design.

The department says the terms of the agreement make it appear that students can only transfer to those institutions — an inaccurate representation of their options. Moreover, the department flagged “what appears to be a sale of student enrollments” to the two universities.

“This arrangement, which could position CEHE to profit from student transfers, heightens our concern about students not being advised of all options available to them,” the department wrote in the letter.

The department asked CEHE to provide an updated draft of a notice it will send out to impacted students about their options within a day. If the organization doesn’t, the letter said, the department may alert state attorneys general “of potential unfair, deceptive and abusive acts and practices.”

The Education Department’s Federal Student Aid office emailed affected students explaining their options and making them aware that they could lose their eligibility for a closed school loan discharge if they transfer.

CEHE officials did not answer Higher Ed Dive’s emailed questions by publication time Monday.

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