When Education Secretary Betsy DeVos reinstated a controversial accrediting agency in April 2018, she threw a lifeline to Virginia College, a chain of for-profit schools that some higher education experts said should have closed.
No accrediting agencies believed Virginia College had a solid enough footing to participate in the federal financial aid program. The chain had no luck finding a new accreditor after the Obama administration stripped the school’s previous accreditor, the Accrediting Council for Independent Colleges and Schools, of the power to give colleges access to federal student aid.
But once DeVos granted the council a reprieve, Virginia College was allowed to remain in the federal aid program and prolong what many saw as an inevitable demise. The chain abruptly closed in December, leaving students in the lurch. Now, former students Mark Passut and Mark Kaiser are filing a class-action lawsuit against DeVos and the Education Department for what they consider an ill-fated and illegal decision.
“This shouldn’t have happened,” Passut said. “The Department of Education should be held accountable.”
The case, filed Monday in the U.S. District Court for the District of Columbia, explores the consequences of the secretary’s decision in April 2018 to grant the council, known by its acronym, ACICS, temporary recognition to act as a gatekeeper for billions of dollars in federal financial aid.
A federal judge had ordered DeVos to review a 2016 petition by the council for reinstatement but did not explicitly say the department had to reinstate the accreditor. The Obama administration declared the accrediting body beyond redemption after identifying oversight failures. DeVos restored its status as a federally recognized agency pending her final decision.
Attorneys for the students say DeVos lacked the authority to order an interim reinstatement and to do so without conducting a substantive review.
“A secretary can’t just extend an accreditor’s recognition without going through appropriate procedures,” said John Lewis, an attorney at Democracy Forward, a liberal litigation and policy shop representing the students. “After the department took ACICS’s recognition away, that decision had to stand until it was reversed through the appropriate procedures.”
Lewis also claims that DeVos should have recused herself from the case because she has expressed skepticism about the Education Department’s oversight of for-profit colleges and argued that the process for allowing accreditors to be involved in the federal aid program is too onerous. That sort of bias, he argues, makes it impossible for the secretary to be objective.
The Education Department declined to comment on pending litigation.
Lewis is asking the court to throw out DeVos’s interim recognition of the accreditor and cancel any federal loans issued to pay tuition at Virginia College between June 12 and Nov. 21, 2018.
“These students took out thousands of dollars in student loans on the promise that they would be able to continue and complete their studies at Virginia College,” Lewis said. “That didn’t happen when the school closed, so those students are entitled to redress.”
Virginia College was in turmoil long before its accreditation became an issue. Eighteen of its programs were among nearly 1,000 career-training programs cited by the Education Department in 2017 for failing “gainful employment” standards.
The regulation, enacted by the Obama administration, threatens to withhold federal financial aid from vocational programs that consistently saddle graduates with more debt than they can repay. The Trump administration has not enforced the rule, choosing instead to write its own regulation that is likely to debut in the coming month.
Meanwhile, enrollment at Virginia College was steadily declining. In September, Education Corporation of America, the school’s parent company, said it would close 16 of 33 Virginia College campuses. A month later, the company disclosed in court documents that it was on the brink of insolvency, burdened with lawsuits and under threat of eviction.
All the while, Passut said Virginia College never let on during the last semester that it was facing problems. He recalls school officials assuring students that everything was fine after the council was reinstated.
Lewis, Passut’s attorney, said welcoming the council back into the fold gave a failing school more time to enroll students and collect federal student aid dollars before folding.
In December, Education Corporation of America ceased operations, citing dwindling enrollment and regulatory pressures after the council, which was fully reinstated weeks prior, withdrew its accreditation. The closure left nearly 20,000 students holding debt and scrambling to complete their education.
Passut was among them. He was months shy of completing a degree in occupational therapy when the coordinator of his fieldwork assignment told him Virginia College was closing. No one from the school, he said, contacted him about its impending closure.
“I was in a state of overall shock” Passut said. “We were basically left on our own. It was very unorganized. I couldn’t get answers from anybody."
With most of the credits he needed to complete his program, Passut said his priority was to transfer to another school. Transferring, however, made him ineligible to have the $24,000 in federal loans he amassed at Virginia College forgiven under what’s known as a closed-school discharge. In exchange for that loan forgiveness, he would have been required to forgo all of the credits he earned and start over.
“Discharge wasn’t an option. I had come too far,” said Passut, who added he just wants the $4,300 forgiven that he borrowed for the fall semester at Virginia College.
Passut added another $6,000 in loans to his balance when he transferred to Eastern Virginia Career College and had to retake several courses the school would not accept from Virginia College. At this point, he expects to complete his degree and take the board exam in October.
“I should already have a job,” Passut said. “I stayed in school for three years to do this. It’s not right."