For-profit college closes operations, surprising students
JACKSON, Miss. -- One of the nation's largest for-profit college chains announced Wednesday that it was abruptly closing in dozens of locations nationwide, after its accrediting agency suspended approval.
Birmingham, Alabama-based Education Corp. of America said it was closing schools operating as Virginia College, Brightwood College, Brightwood Career Institute, Ecotech Institute and Golf Academy of America in more than 70 locations in 21 states. The company said in October that it had more than 20,000 students, although more recent documents indicate the number may be closer to 15,000.
The company, backed by investors including private equity firm Willis Stein & Partners of Chicago, is the latest in a series of for-profit colleges to close after allegations that they were loading students up with debt while not providing them with marketable skills.
In some cases, students told local news outlets Wednesday that operations ceased immediately, while in other cases students said they were told to return for meetings later.
ECA spokeswoman Diane Worthington said that at most locations, Friday would be the last day of classes, and students would get academic credit for this term. One ECA institution, New England College of Business, is not closing. The company mostly offers professional certificates in subjects like cosmetology, culinary arts and medical and dental assisting.
In a letter to students, ECA CEO Stuart Reed said the company's impending loss of accreditation, along with added requirements from the U.S. Department of Education, made the company unable to raise more money to operate the schools while it sought to reorganize.
"It is with extreme regret that this series of recent circumstances has forced us to discontinue the operation of our schools," Reed wrote.
In October, the company sued the U.S. Education Department seeking to maintain its federal funding, which was in jeopardy over its dire financial situation. A judge later dismissed the suit.
Court documents filed by the company said its lagging revenue left it unable to make payments on its debt or rental fees, and that it faced eviction at several campuses. ECA estimated it owed $66 million at the time. Even before then, ECA was planning to shutter 26 campuses to cut costs. Another federal judge in Georgia later granted a bankruptcy-like receivership meant to protect the company from creditors.
ECA largely blamed falling enrollment on an upswing in the economy, which left fewer adults heading to school for job skills, and on increased federal regulation of the for-profit college industry.
The sudden closure drew criticism from the U.S. Education Department, which said it had been working with the company to arrange a shut-down that gave students time to transfer.
"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," Liz Hill, an Education Department spokeswoman, said in a statement.
Like the recently shuttered Corinthian Colleges and ITT Technical Institute chains, Education Corporation of America was overseen by the Accrediting Council for Independent Colleges and Schools, one of the watchdog groups the federal government appoints to ensure colleges offer a quality education.
The council, known as ACICS, wrote a Tuesday letter to Reed saying it was suspending accreditation immediately at all the institutions, citing "rapidly deteriorating financial conditions," a failure to make required payments to the council and a wide variety of academic concerns.
ACICS was shut down by the Obama administration over allegations of lax oversight, but was later reinstated on Nov. 21 by Education Secretary Betsy DeVos, who found it was "substantially in compliance" with federal standards.
Virginia Rep. Bobby Scott, the top Democrat on the House Education and the Workforce Committee, urged DeVos to rethink her decision on ACICS after the Wednesday closure.
"We have repeatedly warned about the risks low-quality, for-profit education companies and irresponsible accreditors pose to students and taxpayers across the country," Scott said in a statement. "Today's announcement is another painful reminder of those risks."
In many cases, students and teachers were in class when they got the news Wednesday. Melissa Zavala, who was studying to be a medical assistant at a San Antonio, Texas, campus of Brightwood, told KSAT-TV students were taken to an auditorium.
"The director was there and she was like, 'I have bad news. The school is closing down,'" Zavala said. "Everyone was like, 'What about our student loans? We're almost done.'"
Zavala said campus officials couldn't provide additional information and told them to look online for other colleges they could attend.
"They took our money, they shut the school down and that's it for us," Zavala said.
Toby Merrill, who directs the Project on Predatory Student Lending at Harvard Law School, said students can ask the U.S. Department of Education to cancel loans if a school closes. However, that opportunity doesn't apply if a student transfers credits or if a school hires a successor to offer students classes to complete their programs.
Binkley reported from Cambridge, Massachusetts.
Follow Jeff Amy at: http://twitter.com/jeffamy .