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Advocacy group claims Department of Education should not receive federal aid for 5 for-profit organizations on Sweet v. Cardona

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A quick dive:

  • The U.S. Department of Education is allowing several for-profit colleges to continue accessing federal financial aid even as they face scrutiny from state attorneys general and their accreditors. according to a new report from the National Student Advocacy Network.
  • The advocacy group says the Department of Education recently authorized five for-profit colleges to sign participation agreements, which are contracts that give institutions access to federal student loans and Pell grants as long as they comply with federal higher education laws and regulations. PPAs allow colleges to continue receiving federal financial aid through 2024.
  • Each of the colleges in question in the list of institutions whose former students will automatically receive debt relief under a recent $6 billion settlement with the Department of Education. And one, the Pittsburgh Career Institute, is closing this week after its accreditor lost federal recognition.

Dive Insight:

Student Protection argues that the Department of Education’s decision to enter into or renew a PPA with a college is the most important decision it can make to “protect students from unscrupulous programs and bad actors.” However, the organization accuses the agency of entering into PPAs with colleges that have a history of consumer fraud.

The report highlights the department’s decision to approve PPAs for five for-profit colleges: Gwinnett College, La’ James International College, Lincoln College of Technology, Pittsburgh Career Institute and Southern Technical College. All the PPAs were signed in August and September this year, it said.

Earlier this month, the Education Department satisfied the legal process which affects borrowers who attended the five colleges in the Student Defense report. The agreement automatically discharges student loan debt for certain borrowers who attended any college from a list of more than 150 institutions.

The Ministry of Education said it had put the colleges on the list because of serious indications of “substantial wrongdoing”, which in some cases had been proven. The settlement applies to those who filed borrower repayment claims, which can clear the debts of students misled by colleges.

However, some institutions on the list object that the settlement proves wrongdoing on their behalf. The federal judge who approved the settlement wrote that the list of 151 colleges did not have the “inadmissible scarlet letter” on them.

The Student Protection Report highlights other legal issues related to colleges. In 2015, Lincoln Tech agreed to pay $850,000 to investigate allegations that the college violated the Massachusetts Consumer Protection Act.

Since then, the agency has faced other federal and state requests, the report said. For example, the Consumer Financial Protection Bureau requested information last year about “extending credit” at the school to its students. Around the same time, an internal Department of Education audit determined that the college was not in compliance with federal requirements for emergency programs related to the coronavirus.

In a statement, Lincoln Tech said it provided detailed explanations to the regulators mentioned in the Student Defense report.

“We believe that the report grossly mischaracterizes the issues and does not adequately reflect the relevant findings,” it said.

The report also focused on La’James International College. In 2020, the Iowa Attorney General found the college out of compliance with the calculation of 2016 that allowed the fraud charges, according to the Des Moines Register. Under the settlement, the college agreed to pay the state $500,000 and repay $2.1 million in student debt.

Representatives for the Department of Education and the other four colleges did not immediately respond to requests for comment.

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