The U.S. Department of Education imposes the highest level of cash management, known as HCM2. That means a college — with little or no cash — must first pay out of its own funds the disbursement to students and then later submit requests for reimbursement to the department.
Then the accreditor suspends or withdraws the college’s accreditation. A college still maintains its accreditation during the time given to appeal such action. If they appeal, the accreditation exists during the length of the appeal process. There is time to manage an orderly closure of a school. But certain steps must occur — such as filing that appeal.
In this case, the college then abruptly closes, leaving 19,000 students — some close to graduation — on the street with nowhere to finish their current academic programs.
Here’s the problem. Everyone will tell you the students are their focus. But the process doesn’t bring together the different parties to create a contingency plan that protects the students and their education. Teach-out plans are not teach-out agreements. In many conversations between the college, the department, the state agency and the accreditor, full collaboration simply breaks down.
So who is at fault? The department? The state agency? The accreditor? The college? To be honest, who cares? The result remains the same — students and taxpayers are being harmed.
In Education Corporation of America’s situation, different people have different perspectives on both what happened and who is to blame. Over time we may figure out the real answer. But our immediate focus must be on keeping students in their studies.
The department might be the right place for this to happen, using experienced professionals who both understand the dynamics and the multiple roles and regulations impacting sales, transfers or teach-outs. Certainly, one or possibly more accreditors must be involved. State agencies must be involved. But the department, using various triggers such as show-cause notices or HCM2 financial arrangements, needs the tools to step in and manage a school’s closure in ways that best serve all interests, starting with the students’ continuing education.
Abrupt school closures are the for-profit career college sector’s worst nightmare. The closed college is done. But every remaining college in our sector must deal with the reputational hit of an abrupt closure — in this case a closure covering 20 different states.
Two years ago, a task force including over 70 of our sector’s best minds combined their work to produce a comprehensive proposal for reauthorization of the Higher Education Act. The entire document and all its recommendations were approved by our Board of Directors and shared with the U.S. Congress and the department.
No working group within this task force displayed more urgency, frustration and creativity than those working on the issue of school closures. These school leaders wanted to find a collaborative way to work with the department, the states, the accreditors and adjacent colleges to keep every student in class. They wanted to change the focus from regulating a challenged college out of business to helping students.
In what might seem unusual in today’s political climate, we recommended Congress and the department consider a $5 per student fee each year on every proprietary college to fund a new Office of Continuing Education Services. This new office would have one mission — to work with challenged institutions in ways that continue the education of the innocent students they enroll in the event of a closure.
Today there does not exist within the department specific professionals or specific authority to work with students and college to continue the current education of these students. This office would be given explicit authority to engage with schools, convene appropriate meetings and work with accreditors, state licensing agencies and other schools with the primary — if not exclusive — focus of continuing education services to the students.
The department and the college’s accreditor should both be empowered to convene a working group among responsible parties to develop a managed closure and transition that keeps every student in class and on a path toward their professional credential. If one doesn’t, then the other can. Our proposal for an Office of Continuing Education Services is for it to host experienced professionals with know-how and all the right contacts to ensure a smooth transition. Think of how the FDIC manages a transition in a failed bank — professionals come in and achieve the transition to new ownership without any interruption in the customer’s reliance on the bank for their financial services.
Enrollment in our sector for 2016-17 was projected at 2,302,480 students. This enrollment would produce $11.5 million in the first year for a federal Office of Continuing Education Services. This proposed funding stream represents a financial and moral commitment by college leaders in our sector to solve this problem. Every institution has the right to make an appropriate business decision. But we must find better ways to handle this process, most importantly because we need to find ways to protect students’ ability to complete their education when their college shuts down.
The current system clearly is not sufficient for preventing challenged colleges from becoming closed ones. Our sector is ready to fund an effort to jointly develop solutions that keep students from being harmed. Otherwise, this nightmare will repeat itself again in the future.