"Education Corporation of America, Virginia College, and Brightwood College Turn Out the Lights": Important Advice to ECA students from Steve Rhode

By Steve Rhode (originally posted on December 5, 2018)

I just received a comment from an awesome reader that said, “Just got reports (from several campuses) that ECA has decided to close down all schools (teach out and go forward) effective immediately. Apparently, ACICS pulled their accreditation. Current employees are being let go immediately with no severance or insurance after Friday, 12/7. Don’t know all details yet as its only been a few hours and the media and news outlets have not picked up the story. I wanted to let you know since you have reported the most accurate coverage on ECA’s unraveling. It’s very sad to see ECA end like this. Many people that worked for the colleges truly cared about the students and making a difference in their life. There will be many students that will not be able to finish their education and many remaining employees that will be without a job right before Christmas. This is all so very sad.”

It does appear that ECA and Virginia College are turning out the lights. WRDW 12 in Georgia said yesterday, “A news photographer on the scene spoke with at least two people who say employees were called into a meeting this morning and told the College was being closed. Workers were reportedly told to go home and that they will not be receiving further paychecks. People we spoke to also say they were told this is occurring at locations in other states.” – Source

WTVC in Tennessee has reported similar closures in Chattanooga. – Source

Virginia College in Birmingham Alabama is reported to have closed as well. Officials at this campus are reported to have said they don’t know why this is happening. – Source

Another ECA school, Brightwood College in Texas have announced its closure as well. – Source

Inside Higher Ed is reporting, “In an email to campus employees Wednesday morning, ECA president Stu Reed said that the Department of Education had added new restrictions on its access to Title IV student aid. And on Tuesday night, the Accrediting Council for Independent Colleges and Schools suspended the colleges’ accreditation. Those steps meant the company couldn’t secure the additional capital needed to operate its campuses, he said.

The company also told employees that it would complete current course modules, which will finish in the next two weeks. A skeleton crew of employees will remain on campuses to assist students with obtaining documentation on their programs.”

The schools said they will work with students to access transcripts.

Students who owe federal student loans should immediately talk to their loan servicer regarding the process for a full discharge of their federal student loans if there is no available teach-out program offered by ECA.

By receiving a closed school loan discharge,

• you have no further obligation to repay the loan,
• you will receive reimbursement of payments made voluntarily or through forced collection, and
• the record of the loan and all repayment history associated with the loan, including any adverse history, will be deleted from your credit report.

To be eligible for a full discharge of your student loans, your loans must have been “William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans.”

Loans most easily eligible for forgiveness are ones if:

• you were enrolled when your school closed;
• you were on an approved leave of absence when your school closed; or
• your school closed within 120 days after you withdrew.

For more information on obtaining a closed school discharge, click here.

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This article first appeared on Get Out of Debt Guy blog site.

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

Education Corporation of America brazenly uses an Alabama court to delay lawsuits against it. Is this a great country or what?

Education Corporation of America (ECA), a for-profit college chain, brazenly filed a federal lawsuit in Alabama last month, asking Judge Abdul Kallon to put it into receivership and enjoin all litigation against it. ECA hopes to delay its creditors and other litigants while continuing to receive federal student-loan money.

What a cocky, shameless and impudent strategy!

Judge Kallon initially obliged ECA, ordering a halt to all litigation against ECA until October 29. Then, on October 29, the judge  extended the injunction until November 5. Parties opposing ECA's Alabama litigation must find lawyers to represent them in Alabama, which will be costly.

For example, Gleneagles Office, LLC, a Maryland corporation, filed a lawsuit in Maryland last month, seeking to collect almost $100,000 in back rent and late fees from Virginia College, which ECA owns. Judge Kallon's injunction, issued seven days after Gleneagles filed its lawsuit for back rent, halted that litigation.

Gleneagles hired an Alabama law firm to oppose ECA's attempt to enjoin lawsuits against it. Gleneagles pointed out that ECA guaranteed the Virginia College lease and agreed that any dispute about the lease would be litigated in Maryland. Gleneagles also argued that Judge Kallon does not have jurisdiction over it.

A Texas company also joined the Alabama lawsuit to oppose ECA's request for an injunction. The Texas company is landlord to a Brightwood College campus in Arlington, Texas. Brightwood is another college owned by ECA.

Perhaps ECA's various landlords and creditors have the financial resources to fight ECA in Alabama, but ECA's former students do not. ECA's list of litigation against it (or its subsidiary affiliates) include several suits by former students. ECA managed to force many of these suits into arbitration, probably because ECA required students to sign arbitration agreements as a condition of enrollment.

So what's going on?

ECA is in financial trouble. Enrollments have dropped, and it is in danger of losing its accreditation. Meanwhile it has been sued by landlords, former students, and former employees on a variety of grounds.  ECA managed--temporarily at least--to halt all the litigation against it based on the signature of one Alabama federal judge, who may not have jurisdiction over any of this litigation. Some creditors have joined the Alabama lawsuit to stop this charade, but most of ECA's former students and employees don't have the financial wherewithal to do that.

Essentially, ECA's Alabama lawsuit has given ECA  all the benefits of bankruptcy without the downside of losing federal student loan money.  And when it becomes advantageous to do so, ECA can stroll into bankruptcy court any time it likes.

Isn't it ironic that ECA can use the courts to its advantage while its students are barred from suing it based on arbitration agreements ECA or its subsidiaries required them to sign as a condition of enrollment?

And isn't ironic that ECA can file for bankruptcy whenever it chooses (which it will probably do eventually), while ECA's students face enormous obstacles to discharging their student loans in bankruptcy?

Is this a great country or what?

References

Joinder of  Pioneer Industrial LLC and Pioneer Parking Lot, LLC to National Retail Properties LP's Memorandum in Opposition to Emergency Motion for The Appointment of a Receiver and Entry of a Temporary Restraining Order and Injunctive Relief, filed October 29 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Non-party Gleneagles Office, LCC's Opposition to Plaintiff's Motion for Preliminary Injunction, filed October 29, 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Order Extending Temporary Injunctive Relief, signed on Octobe 29, 2018 in Education Corporation of America, et al. v. United States Department of Education, 2:18-CV-01698-AKK.

Education Corporation of America files for receivership: Using lawyers' tricks to suck up more federal student-loan money

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.