The documents build on prior reports from the committee describing efforts by Education Department officials to shield Dream Center Education Holdings, owner of the Art Institutes and Argosy University, from the consequences of lying to students about the accreditation of its since-closed schools. Now it appears the Education Department tried to shield itself from an ill-fated decision to allow millions of dollars to flow to those schools.
Rep. Robert C. “Bobby” Scott (D-Va.), the chairman of the House Education Committee, is threatening to subpoena Education Secretary Betsy DeVos for more documents related to the department’s role in Dream Center’s actions. Scott says the agency has obstructed the committee’s investigation and refused to answer questions, as emails and letters paint a picture of a federal agency complicit in an effort to place profits before students.
The agency defended its actions.
“It seems to us that the chairman is cherry-picking facts and lacking important context,” said Angela Morabito, a spokeswoman for the Education Department. “The department maintains that it acted in the best interest of students and has continued to act in the best interest of students.”
By law, for-profit colleges must be fully accredited to participate in federal student aid programs. Neither the Art Institute of Colorado, the Art Institute of Michigan nor the Illinois Institute of Art in Chicago and Schaumburg held that seal of approval from their accreditor, the Higher Learning Commission, in the 2018 spring semester. In reviewing Dream Center’s 2017 acquisition of the chain, the accrediting commission raised concerns about the quality of education at the campuses and downgraded their status for up to four years.
The accreditor issued a public notice in January 2018 and instructed Dream Center to inform students, but the Los Angeles company continued to advertise that the schools were accredited. Students kept enrolling, and the Education Department kept giving them federal loans, despite the schools’ ineligibility. Dream Center, which has since folded, could not be reached for comment.
Letters from senior Education Department official Michael Frola to the presidents of the two Art Institute campuses were among the documents made public Tuesday by House Democrats. Frola acknowledges in the May 2018 letters that the schools’ accreditation status made them ineligible to receive federal loans and grants through their students.
The for-profit schools’ downgraded designation as “preaccredited” institutions prohibited the receipt of federal student aid, although nonprofit schools with the same status can receive aid. To rectify the problem, Frola said, the department would retroactively — and temporarily — designate the Art Institutes as nonprofits effective Jan. 20, 2018, the date they lost their accreditation.
At the time, Dream Center was seeking approval from the Education Department, the accrediting commission and the Internal Revenue Service to turn the chain of for-profit colleges into nonprofit schools. That designation would shield the company from having to report whether graduates were earning enough to repay their student loans.
The conversion was still in the works when Frola sent the letters. The timing and scope of the temporary conversion by the Education Department are causing alarm among House Democrats.
“The grant of temporary nonprofit status was directed at what had at that time, been a five-month lapse in eligibility, and five months where Dream Center was receiving funds in violation of [the Higher Education Act] and accompanying regulations,” Scott wrote in a letter Tuesday to DeVos. “This special treatment allowed more students to become entangled in Dream Center, magnifying the abrupt closure of the schools and the displacement of thousands of students.”
Former Art Institute of Colorado and Illinois Institute of Art students are suing DeVos and the Education Department, accusing them of unlawfully issuing loans the students say they should not be forced to repay. The National Student Legal Defense Network, a legal aid group representing the students, used many of the documents unearthed by House Democrats as evidence in the complaint.
“We’ve known for a long time that the Art Institutes lied to students about losing accreditation. Now, we know that the Department of Education misled them, too,” said Eric Rothschild, an attorney at the National Student Legal Defense Network who is representing the students.
Robert J. Infusino, one of the students involved in the case, was pursuing a degree in audio production at the Illinois Institute of Art when the school announced in summer 2018 it would be closing at the end of the year. Infusino, 23, was livid when he learned during a meeting about the imminent closing that the school had lost accreditation six months earlier but had not informed students.
He was $28,000 in debt for a degree he was a few months shy of completing. But transferring his credits to another school became a nightmare because few were willing to accept classes from an unaccredited institution. When Infusino finally found an online school willing to give him a chance, he had to retake classes, spend more money and take more time to complete his education.
“Had I known what was going on, I would have had time to evaluate the situation, maybe transfer before wasting time and money,” Infusino said. “I thought the government was supposed to look out for students. I feel betrayed.”