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The Anguish of School Closure

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Nkechi Onwuameze
March 21, 2019

There’s no doubt that 2000-2010, as a decade, will go down in history as the worst in terms of catastrophic closure for higher education institutions—i.e. sudden closure without appropriate teach-out plans in place. According to data from the U.S. Department of Education (ED or the Department), about 6,880 higher education institutions were closed between 2010 and 2019. This includes branch locations of some existing schools participating in financial aid programs under Title IV of the 1965 Higher Education Act as amended. While the ED is legally obligated to discharge student loans for students who are eligible, higher education’s doors may be permanently shut for several students from vulnerable populations or students at risk of dropping out who managed to enroll in the first place.

School closures pose a major disruption for all categories of students irrespective of racial or socio-economic background. When a higher education institution closes, very limited options are available to students—first, scramble for a school to transfer to in order to complete the degree. Second, forgo any immediate plan of transferring to another school to continue your education and request for ED closed school loan discharge.

Due to the role the U.S. Department of Education plays in financing higher education, it is a key player in school closure matters. According to Preston Cooper, who writes about the economics of higher education with ITT Tech closure, one of the largest for-profit institution in the United States, “The Department demonstrated its ability to bring down a school in a matter of weeks.” Due to failure to meet financial obligations and other regulatory requirements, by 2016 ED enhanced regulatory oversight and enforced stricter financial standards on ITT Tech, including prohibiting the school from recruiting additional students needing Title IV funding and increasing the LOC from $124 million to approximately $247 million. Eleven days after receiving these heavy sanctions from ED, ITT Tech announced that all its 130 campuses with 43,000 students would shut down.

The recent action by ED against the education corporation, Dream Center Education Holdings (DCEH), which owns Argosy University, South University and the Art Institutes, also reveals the role of ED in school closures. Due to failure to meet financial obligations, DCEH institutions were placed on Heightened Cash Monitoring Level 2 (HCM2) by ED. Argosy University was later denied participation in federal student financial aid programs. As a result, DCEH abruptly announced the closure of some of its schools on March 8, 2019. ED has published a list of DCEH schools impacted.

When these closures happen, ED is quick to publicize information on closed school loan discharge. Students are notified that they may qualify for 100% loan discharge of William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins loans if their school closed before they could complete their programs. To determine eligibility, the following criteria apply:

  • The student was enrolled when the school closed.
  • The student was on an approved leave of absence when the school closed.
  • Or, the student’s school closed within 120 days after withdrawal.

While some students may get relief from having their school loans discharged, ED’s school closure loan discharge policy may deter other students from making the decision to further their education. Students who are, “Completing a comparable educational program at another school” through teach-out plans, an agreement for transfer of academic credits from the closed school to other schools, “Or by any other comparable means,” are ineligible. Whatever option a student picks, i.e. to continue education and forgo loan forgiveness or accept loan forgiveness and risk not continuing their education, there is bound to be a financial burden associated. This may be worse for minority students from vulnerable populations as they may have limited support networks or lack resources to make informed decisions.

In the case of Argosy University, with several hundreds of students in professional licensed doctoral programs such as psychology and counseling that require a long-term commitment in school, the pain and anguish, especially for students nearing graduation, can only be imagined. While ED took action to help students by canceling spring semester loans even before the schools closed, the Department has been criticized for not doing enough to help students with transitions. In a letter jointly signed by Senator Kamala Harris, Senator Dick Durbin and 11 other senators, lawmakers admonished ED to take appropriate steps to protect students. The letter charged the Department, “To ensure that teach-out and transfer institutions guarantee that students’ credits will be accepted, that students will not be charged additional tuition and fees and that options will include all colleges with similar programs within reasonable proximity to the Argosy campus and not include exclusively online institutions.” While ED has authority in this space to drive changes, several students will still be left in limbo as abrupt closure gives fewer options to students. In the absence of a teach-out agreement, receiving institutions have the final decisions (typically guided by accreditation standards) on the number of credits they choose to accept.

Nkechi Onwuameze works for the Illinois Board of Higher Education and an adjunct professor at the University of Illinois Springfield. She earned a Ph.D. in sociology of education at the University of Iowa. Her research interest include educational inequality, gender discrimination in the workplace, workplace diversity. [email protected] or Twitter: @Nkobis

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