Financial Aid Programs Should Be For Students, Not Corporations

Once she started, Lee enjoyed the program. The people—teachers and staff included—seemed to actually care about the students. “I was getting good grades, I had a good GPA, I found out I was on the dean’s list,” she said. And then, on Wednesday, the school’s parent company, Education Corporation of America, announced that on Friday it would close all of its campuses nationwide. And Lee, five months into her nine-month program, will likely never receive the certificate she has sunk both time and money into.

Lee is one of the more than 19,000 students affected by the abrupt closure of Education Corporation of America, one of the country’s largest private for-profit college operators, which runs Virginia College, Brightwood College, Brightwood Career Institute, Ecotech Institute, and Golf Academy of America. The for-profit operator had been in a precarious position for some time, given a pending loss of accreditation and access to federal financial-aid funds. In a letter to students on Wednesday, Stu Reed, the CEO of Education Corporation of America, said, “It is with extreme regret that this series of recent circumstances has forced us to discontinue the operations of our schools.” The company had tried to “dramatically restructure” itself, including campus closures over time. But the outside pressures, it argued, were too powerful, and it had to accelerate the process of closing schools. But until then, students, by and large, were unaware that the problems were that severe. ECA did not immediately respond to a request for comment from The Atlantic.

There have been a handful of closures of major for-profit operators over the past few years, most notably the closure of Corinthian Colleges in 2015 and ITT Technical Institute in 2016. In each of these cases, there were thousands of real people, like Lee, who were left wondering how to pick up the pieces after they’d invested valuable resources into an education that suddenly disappeared.

When a college closes abruptly, students can often have their federal student loans discharged, Toby Merrill, the director of the Project on Predatory Student Lending at Harvard, told me. But that doesn’t happen automatically, she says, and students have to apply to receive the funds. Typically, after they apply, the discharge takes roughly a month or two. Historically only a fraction of students who were eligible for such discharges have ever received them. However, the Department of Education recently changed its policies to provide automatic loan cancellation to all eligible students, as long as they do not enroll in another program that uses federal financial aid within three years.

But even though students may be eligible to get their loans discharged, Lee says, they are unlikely to get any credit for the work they’ve already done, and that doesn’t account for the money they spent out of their own pocket. “Signing up for school, they were telling us that a lot of schools do not take their credits,” Lee told me. But she figured it would be worth it because if she finished school there, the credential would follow her for life. Now that the school is closed, though, the consequences of this are more readily apparent: She can’t transfer into another program and would likely have to start from scratch. “I’ve missed out on five months of things with my kids to be in school,” she says. “I only had four more months to go.” And to have that rug pulled out from under her is “discouraging.”

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