A major for-profit college chain shut down Wednesday, leaving roughly 20,000 students scrambling to figure out their next steps.
Education Corporation of America, the parent company of schools like Virginia College and Brightwood Career Institute, closed its doors after several months of financial turmoil due in large part to declining enrollment.
In the lead up to its collapse, the company, which offered career-focused programs in fields like cosmetology and culinary arts, announced plans to shut down dozens of campuses and unsuccessfully sued the Department of Education to get access to federal financial aid dollars while in a receivership — a situation similar to a bankruptcy where an outside entity manages a company’s finances.
Just this week, Virginia College, one of ECA’s major subsidiaries, had its accreditation, a seal of approval required for a school to receive access to federal financial aid dollars, suspended. The school was accredited by the Accrediting Council for Independent Colleges and Schools, a controversial gatekeeper that oversaw other for-profit colleges accused of misleading students.
“Their shutdown can only be said to be caused by their own malfeasance,” Toby Miller, the director of the Harvard Law School’s Project on Predatory Student Lending, said of ECA.
Several of the programs at ECA had failed to meet a standard, known as gainful employment, developed during the Obama administration indicating that they prepared students with jobs that would pay them enough to repay their student loans. “Their programs have shown themselves to be of little value,” Miller said.
ECA’s shut down is the latest in a string of collapses of major for-profit college chains. In 2015, Corinthian Colleges filed for bankruptcy amid claims the company lured students with inflated job placement and graduation rates. In 2016, ITT Technical Institutes shuttered under similar circumstances.
Miller, who works with student-loan borrowers who say they’ve been scammed by their for-profit colleges, said she’s heard evidence of similarly troubling behavior from ECA, including targeting communities of color and misleading students about the amount of in-person instruction they’d receive in their programs.
ECA’s shut down also comes as the regulatory environment surrounding for-profit colleges is in flux. Following the collapse of Corinthian and ITT, the Obama administration, pressured by activists, developed a rule to make borrowers whole when they’ve been misled by their schools. Over the past several months, the Trump administration has worked to re-write that rule in addition to an Obama-era regulation aimed cracking down on poor performing for-profit college programs.
“The harm that these schools cause people, whether they collapse at the end or not, is tremendous,” Miller said. “By not addressing this problem, we’re leaving a generation to rot with unpayable debt and ruined financial futures for reasons that are not their fault.”
Closure has left students scrambling
In the case of ECA, tens of thousands of students are now left scrambling just a couple of weeks before what would be the end of the semester, despite that the company was aware of its financial and accreditation troubles for several months.
“I would like to know what this company did to try to minimize harm for students when the writing was pretty clearly on the wall,” said Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank.
That remains unclear. In a letter to ECA’s chief executive officer, ACICS demanded Virginia College submit evidence of the successful completion of programs for students who were supposed to graduate in at the end of this month and executed transfer agreements showing enrolled students can complete their programs elsewhere.
Liz Hill, a spokeswoman for the agency, called ECA’s sudden shutdown “highly disappointing” in an emailed statement. The Department was in daily contact with ECA and other potential partners to ensure as many students as possible would be able to finish their education, she wrote.
“Instead of taking the next few months to close in an orderly fashion, ECA took the easy way out and left 19,000 students scrambling to find a way to finish the education program they started,” Hill wrote in the email.
She added that the agency is ready to help students transfer to other institutions or receive a closed-school discharge, a provision that allows borrowers who are attending a college that closes to have their federal student loans wiped away. (Students can apply for a closed-school discharge here). An ECA representative didn’t immediately respond to a request for comment.
Students who were attending ECA schools when they closed have the right to have their loans discharged as long as they do not complete a comparable program at another school.
Whether a student opts to have their loans wiped away or to continue on with their education, depends on their circumstances, Ben Miller said. “If you were a couple of weeks from graduation it might be worth finding a place to finish out, especially if you are graduating from a program that has decent outcomes,” he said.
Still, students who are eager to transfer and finish their programs elsewhere should approach the decision cautiously, Toby Miller said. After both Corinthian and ITT collapsed, other schools with poor outcomes rushed into lure the companies’ former students into transferring.
That’s why, even though it’s certainly a difficult time, “I would suggest that students step back and take look at their options before deciding what to do,” she said.
For former ECA students just starting out, particularly those in a poor-performing program, “I would look at this as an opportunity to get out from under loans that you probably wouldn’t be able to repay,” Ben Miller said.
Were you affected by the closure of Virginia Colleges or one of ECA’s other schools? We’d like to hear from you. Email: firstname.lastname@example.org.
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