Education Corporation of America (ECA), a for-profit college chain, filed a lawsuit a few days ago in an Alabama federal court. The lawsuit seeks to put ECA into receivership, and it asks the court to halt all litigation against it. ECA also wants Betsy DeVos and the Department of Education to keep showering it with student-loan money while it straights out its financial affairs.
ECA is closing more than two dozen of its campuses; and it needs to keep getting federal student-loan money, it argues, so it can do a "teach out" at campuses it intends to close. If it allows current students to finish their academic programs (through a teach-out), those students won't be eligible to have their student loans forgiven under the "closed school" rule. That will save the Department of Education a lot of money, ECA says.
This line of bull reminds me of the story about a man who murdered his parents and then begged the court for leniency on the grounds he was an orphan.
ECA operates under numerous brand names, including Virginia College, New England College of Business, Brightwood College, and Golf Academy of America; and it is in big financial trouble. It submitted a list of legal claims against it to the Alabama court, which is 15 pages long. Landlords are suing for back rent and other litigants have sued for breach of contract, fraud, failure to pay wages, race discrimination, age discrimination, false advertising and some other stuff.
Why doesn't ECA just file for bankruptcy? One reason: Under federal law, ECA would immediately lose access to all federal money if it filed for bankruptcy. It is hoping to keep federal money flowing as a long as possible.
I hope Judge Abdul Kallon sees through ECA's dodgy litigation ploy and refuses its plea for a receiver and an injunction against its creditors. (Judge Kallon granted ECA a temporary restraining order on October 19, but he will have to extend it to keep ECA's creditors at bay.)
ECA needs to close, and it needs to close NOW. Every day it continues operating is another day uninformed students will be taking out student loans to pay for an ECA education that probably won't get them a good job. In fact, ECA's own accrediting agency scored ECA's campus-level job placement rate at only 16 percent.
References
David Halperin. For-Profit College Chain Claims Financial Distress, Sues DeVos. Republic Report, October 18, 2018.
Steve Rhode. Education Corporation of America Whines Over Failure. Get Out of Debt Guy (blog), October 22, 2018.
Alan White. For-profit college chain files (for receivership). Credit Slips, October 22, 2018.
Showing posts with label receivership. Show all posts
Showing posts with label receivership. Show all posts
Wednesday, October 24, 2018
Tuesday, August 2, 2016
St. Catharine College of Kentucky is in receivership: More small colleges will close as federal oversight squeezes small liberal arts colleges out of business
Last month, St. Catharine College closed its doors for the final time. More than 100 faculty members and staff were laid off, and a federal court placed the college in receivership, which means a court-appointed overseer will manage the institution's assets on behalf of creditors.
St. Catharine's leaders blamed its closure on the U.S. Department of Education. DOE put the college on its "Heightened Cash Scrutiny" list, subjecting it to more onerous regulation of its federal financial aid money. College administrators said DOE's move was unjust and forced the college to close.
St. Catharine is one of 517 colleges and universities on DOE's latest "Heightened Cash Scrutiny" list, which includes proprietary schools, a few public universities, about 40 foreign institutions, and quite a few small liberal arts colleges like St. Catharine. Not all these schools will close in coming years, but some of them will.
For example, Shimer College is on the list; Shimer only has about 100 undergraduates. How long do you think Shimer will last? Pine Manor College, a small school in Brookline, Massachusetts, is also on the list. Pine Manor had about 500 students in the fall of 2015; and the total cost of attendance (tuition, room and board, etc.) is $43,000. How healthy do you think Pine Manor is?
Small liberal arts colleges all over the United States will be closing at an accelerating rate in the coming years. The cost of attendance is simply too high at these little schools. Of course, most small private colleges are now discounting their tuition rates for entering freshmen--on average, first-year students are only paying about 50 percent of the sticker price. But slashing tuition fees has not lured enough customers for many small colleges to keep their enrollments up.
I don't know enough about St. Catharine's situation to determine whether DOE treated the college unfairly. DOE may have had good reasons for putting St. Catharine on its "Heightened Cash Scrutiny" list. But it is fair to say that DOE's intensive meddling in college affairs has increased administrative costs for American colleges and universities. Small institutions--colleges with less than a thousand students--simply can't afford the mounting costs of complying with federal mandates.
For a major public university, new DOE mandates are manageable. The University of Texas, for example, can hire additional administrators to comply with federal regulations; and it has a battalion of lawyers who can draft updated university policies to comply with new federal regulations that are spewed out of Washington.
But the little colleges simply can't afford the cost of complying with ever more intrusive federal regulations--FERPA, the Clery Act, Title IX, Section 504, etc. And one by one, small liberal arts colleges will begin closing.
I foresee the day when American higher education will consist of three sectors: 1) secular public institutions, for-profit colleges, and elite private colleges and universities that have large endowments. Small liberal arts colleges, once a respected and important segment of American higher education, will soon be a thing of the past.
References
Paul Fain. St. Catharine College Placed in Receivership. Inside Higher Ed, July 28, 2016. Accessible at https://www.insidehighered.com/quicktakes/2016/07/28/former-st-catharine-college-placed-receivership
Rick Howlett. St. Catharine College Closes Its Doors For the Final Time. WFPL, August 1, 2016. Accessible at http://wfpl.org/st-catharine-college-shutters-doors/
Kelly Woodhouse. (2015, November 25). Discount Much? Inside Higher Ed. Accessible at: https://www.insidehighered.com/news/2015/11/25/what-it-might-mean-when-colleges-discount-rate-tops-60-percent?utm_source=Inside+Higher+Ed&utm_campaign=389f6fe14e-DNU20151125&utm_medium=email&utm_term=0_1fcbc04421-389f6fe14e-198565653
St. Catharine's leaders blamed its closure on the U.S. Department of Education. DOE put the college on its "Heightened Cash Scrutiny" list, subjecting it to more onerous regulation of its federal financial aid money. College administrators said DOE's move was unjust and forced the college to close.
St. Catharine is one of 517 colleges and universities on DOE's latest "Heightened Cash Scrutiny" list, which includes proprietary schools, a few public universities, about 40 foreign institutions, and quite a few small liberal arts colleges like St. Catharine. Not all these schools will close in coming years, but some of them will.
For example, Shimer College is on the list; Shimer only has about 100 undergraduates. How long do you think Shimer will last? Pine Manor College, a small school in Brookline, Massachusetts, is also on the list. Pine Manor had about 500 students in the fall of 2015; and the total cost of attendance (tuition, room and board, etc.) is $43,000. How healthy do you think Pine Manor is?
Small liberal arts colleges all over the United States will be closing at an accelerating rate in the coming years. The cost of attendance is simply too high at these little schools. Of course, most small private colleges are now discounting their tuition rates for entering freshmen--on average, first-year students are only paying about 50 percent of the sticker price. But slashing tuition fees has not lured enough customers for many small colleges to keep their enrollments up.
I don't know enough about St. Catharine's situation to determine whether DOE treated the college unfairly. DOE may have had good reasons for putting St. Catharine on its "Heightened Cash Scrutiny" list. But it is fair to say that DOE's intensive meddling in college affairs has increased administrative costs for American colleges and universities. Small institutions--colleges with less than a thousand students--simply can't afford the mounting costs of complying with federal mandates.
For a major public university, new DOE mandates are manageable. The University of Texas, for example, can hire additional administrators to comply with federal regulations; and it has a battalion of lawyers who can draft updated university policies to comply with new federal regulations that are spewed out of Washington.
But the little colleges simply can't afford the cost of complying with ever more intrusive federal regulations--FERPA, the Clery Act, Title IX, Section 504, etc. And one by one, small liberal arts colleges will begin closing.
I foresee the day when American higher education will consist of three sectors: 1) secular public institutions, for-profit colleges, and elite private colleges and universities that have large endowments. Small liberal arts colleges, once a respected and important segment of American higher education, will soon be a thing of the past.
 |
| St. Catharine College is in receivership |
Paul Fain. St. Catharine College Placed in Receivership. Inside Higher Ed, July 28, 2016. Accessible at https://www.insidehighered.com/quicktakes/2016/07/28/former-st-catharine-college-placed-receivership
Rick Howlett. St. Catharine College Closes Its Doors For the Final Time. WFPL, August 1, 2016. Accessible at http://wfpl.org/st-catharine-college-shutters-doors/
Kelly Woodhouse. (2015, November 25). Discount Much? Inside Higher Ed. Accessible at: https://www.insidehighered.com/news/2015/11/25/what-it-might-mean-when-colleges-discount-rate-tops-60-percent?utm_source=Inside+Higher+Ed&utm_campaign=389f6fe14e-DNU20151125&utm_medium=email&utm_term=0_1fcbc04421-389f6fe14e-198565653
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