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Department of Education pulls federal aid to trade schools

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Updated with a response from Marinello Schools of Beauty.

The Department of Education cut off federal loans and grants Monday to dozens of beauty schools and three technical trade schools for falsifying a wide range of records.

“Our students depend on higher education institutions to prepare them for careers through a quality education. Unfortunately, some schools violate their trust through deceptive marketing practices and defraud taxpayers by giving out student aid inappropriately,” said Under Secretary Ted Mitchell  in a statement. “These unscrupulous institutions use questionable business practices or outright lie to both students and the federal government.”

Marinello Schools of Beauty, a for-profit chain owned by B&H Education, is accused of illegally requesting federal financial aid for students with invalid high school diplomas, charging students for excessive overtime and withholding a portion of students’ federal aid. As a result, the government is withholding aid from 23 of the chain’s 56 campuses in Nevada and California that enroll about 2,100 students.

In the 2014-2015 academic year, students enrolled in Marinello received more than $87 million in Pell grants and federal loans.

The list your college does not want to be on

All Marinello schools were previously placed under tougher oversight known as “heightened cash monitoring.” There are myriad reasons schools can end up on the list, including turning in late financial statements, having accreditation issues or operating with a lot of debt.

Marinello spokesman Joe Hixson said the company has a “long history of compliance,” yet the department has delayed funding for the last two months without specifying allegations of wrongdoing or allowing the company to respond.

“We repeatedly took action to demonstrate to the Department that these circumstances were unsustainable, but it is only now that the Department disclosed to us its unfounded allegations,” Hixson said, in an email. “While we intend to appeal this decision and while Marinello believes it has done nothing wrong and will defend itself vigorously, without the federal funds our students deserve, our operations are at risk.”

He stressed that the department’s “unilateral decision-making” will disrupt the education of some 4,300 students and ultimately cost 800 people their jobs.

“We have helped tens of thousands of deserving students obtain licensure in professional occupations for more than 110 years, but that may end due to these unprecedented and unfounded actions,” Hixson said.

In January, California’s Bureau for Private Postsecondary Education barred Marinello from enrolling new students at any of its 45 locations in the state. The board has accused the school of failing to meet minimum operating standards.

In a separate action, the department is denying Computer Systems Institute, or CSI, a pending application for participation in the federal financial aid program. The trade school, which enrolls about 2,600 students, is accused of submitting false job placement rates to its students, the department and its national accreditor, the Accrediting Council for Independent Colleges and Schools.

Students at CSI, which did not immediately return calls for comment, received approximately $20 million in federal funding for the 2014-2015 academic year.

Both schools have the right to challenge the department’s action within two weeks by submitting evidence to dispute the claims.

Within the last three fiscal years, the department has barred 30 schools from receiving federal loans and grants. Critics have complained that the government has been too slow to weed out bad actors, like the now defunct Corinthian Colleges.

For years, the company, which ran the Everest, Heald College and WyoTech schools, stood accused of steering students into high cost loans and running dubious programs. Yet the government kept funneling $1.4 billion in federal financial aid to Corinthian every year. It wasn’t until the summer of 2014, four years after problems at the company first emerged in a Senate investigation, that the department decided to withhold federal funds from Corinthian. The move ultimately crippled the company, forcing the sale of more than half of its 107 campuses.

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