By Owen Daugherty, NASFAA Staff Reporter
A senior official at the Department of Education (ED) allegedly aided a for-profit higher education company that was actively defrauding students and taxpayers, according to a new report released Tuesday by the House Committee on Education and Labor.
The report highlights new documents included in the committee’s oversight report that suggest ED Principal Deputy Under Secretary Diane Auer Jones assisted Dream Center Education Holdings despite the department knowing that the company was improperly collecting federal financial aid and that two of the company’s schools had lost accreditation.
“Rather than cutting off their access to taxpayer money — as the law requires — the documents reveal that the department continued to send these schools millions of dollars in federal financial aid, while also working behind the scenes to attempt to secure ‘retroactive accreditation’ for these schools, a process that would change history to erase Dream Center's misrepresentations to students,” committee Chairman Bobby Scott (D-Va.) said in a statement accompanying the report.
“This is a blatantly political attempt to blame Diane Jones for the actions of the Higher Learning Commission, which violated both Department regulations and its own policies by trying to remove accreditation from two schools," said Angela Morabito, a spokeswoman for the department. "Diane acted appropriately to protect students who had been told they were enrolled at accredited institutions, and whose institutions were still accredited. If Diane was out of line, as they claim, then why did every other accreditor besides HLC manage to do this the right way?”
Had the Dream Center and its subsidiaries closed due to lack of accreditation and subsequent insolvency, it would have given defrauded students a path to have their federal student loans forgiven more easily.
ED allegedly accused HLC of misconduct when it refused to retroactively reinstate the two schools’ accreditation, according to the report.
Jones “circumvented [ED] career staff, telling HLC to communicate ‘exclusively with her at the department on this issue,’ and offering to provide HLC with an ‘easy way to make [retroactive accreditation] work,’” the report stated, citing correspondence between Jones and Barbara Gellman-Danley, HLC’s president.
“Nowhere in the emails does Diane contradict her testimony; in fact, she stated at the hearing that she had conversations with [HLC],” Morabito told The Washington Post. “Those emails were about policies HLC already had in place, and whether they could still be applied since so much time had lapsed.”
Dating back as far as June 2018, the report shows Jones, a former lobbyist for for-profit colleges, sent and received more than 100 text messages from multiple officials at Dream Center.
ED previously said in written responses to questions from lawmakers that Jones first became aware of Dream Center’s accreditation issues on July 10, 2018, and learned a week later that the company had lied to students about the matter, though new documents released with the report Tuesday show her correspondence with Dream Center officials before then.
The report found that HLC in a letter told the Dream Center in January 2018 to inform its students that the two art schools were no longer accredited, but the company waited until June 2018 to notify students.
Additionally, HLC notified ED officials of its letter to the Dream Center to give ED knowledge of the institutions’ loss of accreditation, meaning the institutions were no longer eligible to receive federal financial aid.
However, ED in May of 2018 “retroactively converted these institutions into non-profits solely to keep funds flowing to the schools,” the report alleges, noting that the institutions were retroactively deemed non-profits effective Jan. 20, 2018, the date they lost their accreditation.
As such, the Dream Center was given nearly $11 million in loans from ED, even though for-profit colleges must be fully accredited to participate in federal student aid programs. ED late last year canceled the nearly $11 million in loans to the Dream Center.
“The Committee’s investigation has raised troubling questions regarding [ED’s] oversight and coordination with Dream Center,” the report stated. “The facts outlined above demonstrate that [ED] knew Dream Center was unaccredited in early February 2018, and HLC specifically informed [ED’s] Accreditation Group in May 2018 that Dream Center misrepresented this fact to students, but [ED] took no action until July 2018.”
After HLC informed ED of Dream Center’s accreditation issues, ED officials pursued retroactive accreditation for Dream Center, but did not require the company to correct those misrepresentations for months.
The report also alleges ED opted to withhold pertinent documentary and testimonial information that was requested by the committee.
“Dream Center’s collapse could eventually cost taxpayers between $600 million and $1 billion. [ED] refused to cooperate with this investigation, making it difficult to understand its role in Dream Center’s misconduct,” Scott said. “[ED’s] lack of transparency and the actions described in the documents raise serious questions that must be answered.”
Publication Date: 7/29/2020