The Obama administration took steps Thursday that could effectively force the closure of one of the nation’s largest for-profit college chains, banning ITT Technical Institute from enrolling new students who receive federal aid.
ITT, which has about 43,000 students nationwide, is facing accusations from its accreditor of chronic mismanagement of its finances and using questionable recruiting tactics. The company is also under investigation by state and federal authorities.
The Education Department said Thursday it had lost faith that ITT would survive the scrutiny and banned its schools from accepting new students that receive federal loans and grants to pay for the school’s tuition. Such aid provided 68% of the company’s $850 million in revenue last year.
While ITT can continue to collect aid from current students, without a future source of revenue the company would almost surely be forced to close many, if not all, of its campuses, analysts said. Private lenders have largely stopped making loans to students at for-profit schools since the recession. . . .
The move is part of a broader crackdown by the Obama administration on the for-profit college industry, which officials have accused of using deceptive marketing to enroll vulnerable students who go thousands of dollars into debt for low-quality educations.
Last year, Corinthian Colleges Inc., another major for-profit chain, liquidated in bankruptcy after the Education Department banned it from receiving federal aid amid allegations of inflating the career outcomes of graduates. Corinthian officials denied the allegations.
“Millions of dollars in taxpayer money and tens of thousands of students are in jeopardy,” Ted Mitchell, the Education Department’s undersecretary, said in a call with reporters about the move against ITT. “We have both a legal and ethical responsibility to strengthen safeguards in accordance with the public’s trust.”
The government would likely be forced to absorb losses on student loans if ITT closes under a federal law that relieves students of the obligation to repay their loans under such circumstances.
Many former ITT students have also applied to a federal program that forgives debt if they can prove their schools used illegal recruiting tactics, such as running advertisements with misleading statistics on the career success of graduates. The government has forgiven $171 million in student debt owed by former Corinthian students.
It’s also nice to see that Obama’s DOE has some appropriately cynically-minded regulators:
The Education Department also prohibited ITT from giving raises, bonuses or severance payments to its executives. Agency officials say that under federal law, it can impose executive-compensation limits on companies like ITT that enter contracts with the department to receive federal aid.
Oh the humanity! If the Free Enterprise System stands for anything, it’s for the principle that Emergency Golden Parachutes should be funded by the public. In fact I believe that’s actually in the Constitution, somewhere towards the back. (Leave to a socialist to trample on these sacred tenets).
Luckily this kind of thing obviously has nothing whatsoever to do with law schools:
It’s a mere formality. Every five years, the Department of Education renews the ABA’s power to accredit law schools. The June 2016 session before a DOE advisory committee (NACIQI) was supposed to be just another step in the rubber-stamping process. The NACIQI staff had recommended approval. The committee’s three-day session contemplated action on a dozen other accrediting bodies, ranging from the American Psychological Association to the American Theological Schools. Sandwiched between acupuncture and health education, the agenda contemplated an hour for the ABA.
What could go wrong?
For the next several hours, the ABA Section of Legal Education was much to its evident surprise subjected to the — well-deserved — regulatory equivalent of a root canal:
The ABA’s culture of self-interest and insularity has now created a bigger mess. Some NACIQI members favored the “nuclear” option: recommending denial of the ABA’s accrediting authority altogether. The committee opted to send a “clear message” through less draconian means.
The final recommendation was to give the ABA a 12-month period during which it would have no power to accredit new law schools. Thereafter, the ABA would report its progress in addressing the committee’s concerns, including the massive debt that students are incurring at law schools with poor JD-required placement rates.
As one member put it, “It is great to collect data, but they don’t have any standard on placement. What’s the point of collecting data if you can’t…use the data to help the students and protect the students…”
Another member summarized the committee’s view of the ABA: “This feels like an Agency that is out of step with a crisis in its profession, out of step with the changes in higher ed, and out of step with the plight of the students that are going through the law schools.”
The day of reckoning may not be at hand, but it’s getting closer.
See also Deborah Merritt, who provides a link to a complete transcript of the meeting for the S&M crowd.