Democrats Question Closure of For-Profit Education Corporation of America

By Allie Bidwell, NASFAA Senior Reporter

A group of Democratic lawmakers last week launched an investigation into the collapse of the for-profit college chain Education Corporation of America (ECA), which closed its doors early last month, shuttering about 70 campuses across the country and displacing roughly 18,000 students.

The closure is the largest termination of a for-profit college chain since Corinthian Colleges and ITT Educational Services, Inc. (ITT) abruptly closed in 2015 and 2016, respectively. The group of Democratic lawmakers—Sen. Elizabeth Warren (D-MA), House Oversight Committee Chairman Rep. Elijah Cummings (D-MD), and Rep. Suzanne Bonamici (D-OR)—wrote three letters to ECA, its accreditor the Accrediting Council for Independent Colleges and Schools (ACICS), and Education Secretary Betsy DeVos, pressing for more information about the closure.

The lawmakers took issue with whether the college gave appropriate notice to its thousands of students, and whether it took steps to secure “teach-out” agreements for students in the event of its closure. They also questioned exactly what information executives had about the financial standing of the institution, and how far in advance that information was available.

“ECA had several signals over an extended amount of time that its demise was potentially imminent, while its students across the country had none,” they wrote in the letter to ECA. “The educational pursuits and financial well-being of countless students have been disrupted and put at risk, while massive costs have been incurred by American taxpayers.”

They requested a full timeline of events from January 2015 leading up to ECA’s closure in December 2018, documentation of what the institution communicated to students, faculty, and staff, and more.

In a separate letter to ACICS, the lawmakers questioned why the accreditation agency continued to grant ECA recognition amid “reports of rampant financial stability” leading the Department of Education (ED) to place ECA on heightened cash monitoring, and argued that more strict oversight could have mitigated the closure.

“ACICS possessed the authority to require formal teach-out agreements from ECA before its collapse. Formal teach-out agreements would have best protected students,” the letter said. “Despite the years of evidence that ECA institutions were at-risk, ACICS continued to fully accredit ECA—when at least one other agency refused accreditation—until just days before ECA’s collapse.”

Several other Democratic and Independent senators—Sherrod Brown of Ohio, Mazie Hirono of Hawaii, Richard Durbin Illinois, Richard Blumenthal of Connecticut, Dianne Feinstein of California, Kamala Harris of California, and Bernie Sanders of Vermont—joined in a letter sent to DeVos, pressing the secretary to “take immediate steps to aid and protect students, veterans, and taxpayers in the wake of this significant collapse.”

“Despite the Department’s long-standing knowledge of ECA's financial instability, in the months leading up to the ultimate collapse, the Department appears to have taken little action to protect students and taxpayers,” the letter said. “According to a Department spokesperson, the Department had been ‘in daily conversations’ with the company about students' futures in the event of a collapse. But there is no evidence that the Department used its knowledge of a potential collapse to actually warn students or to secure financial surety or protection for taxpayers. Moreover, the Department has pursued a policy agenda that will make ECA-type collapses more likely-placing students and taxpayers at extreme risk.”

The lawmakers went on to say that the closure of ECA is an example of how ED with DeVos as a leader “has taken a series of actions to prevent accountability for risky for-profit colleges, creating a higher education landscape that is far more vulnerable to sudden meltdowns and predatory behavior.”

“Now that ECA has collapsed, the Department has an urgent responsibility to help the students it failed to protect and to provide these students with clear, helpful, and actionable guidance regarding their options, including their eligibility for closed school loan discharges, borrower defense claims and discharges, and their options for completing their education,” the letter said. “This guidance is critical to protect students from inaccurate or incomplete information that could leave them even worse off after transferring. Students who have been put in this terrible position deserve only the highest quality options going forward.”

 

Publication Date: 1/3/2019


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