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Beauty school chain shuts down days after tangling with the government

(AP Photo/The Orange County Register, Mark Felix, File)
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Marinello Schools of Beauty, a for-profit chain owned by B&H Education, shut down its entire operation Thursday, days after the Department of Education cut off its access to federal loans and grants for allegedly falsifying records.

The company closed campuses in California, Nevada and Utah, with plans to shutter the remaining ones in Kansas and Connecticut on Friday. All told, about 4,300 students and 800 employees will be affected by the decisions. Letters went out to students early Thursday morning, the company said. Students can receive transcripts, proof of training and information about their transfer options at a series of meetings Marinello will hold on its campuses next week.

Problems came to ahead this week when the department accused Marinello 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 decided to withhold aid from 23 of the chain’s 56 campuses in Nevada and California that enroll about 2,100 students.

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At the time, Marinello spokesman Joe Hixson said the company had complied with the department’s demands but that the agency delayed funding for the last two months without specifying allegations of wrongdoing or allowing the company to respond.

“When the department began to withhold funds from our deserving students two months ago, we pleaded with the department to provide even basic information about its concerns, yet it refused to do so,” Hixon said, in a statement Thursday. “We are confident we would have been able to address them. The department waited until we were past the point of no return financially to allow us any opportunity to respond to its unfounded allegations.”

Last month, 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.

All Marinello schools were previously placed under tougher federal 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. In the 2014-2015 academic year, students enrolled in Marinello received more than $87 million in Pell grants and federal loans.

“We are committed to protecting students from deceptive practices and helping those who have been defrauded,” said department spokeswoman Dorie Nolt, in an email. “We are working with state higher education partners to answer questions and address student concerns.”

Nolt said the department will post updated information for students on its website. Staff from the agency will also be available to assist students at locations near Marinello campuses, which will be announced in the coming days.

With thousands of students left with incomplete credentials that they likely borrowed money to obtain, some lawmakers are calling on the department erase their student loans.

“The Department of Education has the ability to discharge all federal student loan debt for these students,” said Sen. Chris Murphy (D-Conn.), in a statement. “I encourage them to expedite the process so that these borrowers can get their money – and their right to a real education – back in their own hands.”

Obama administration plans to overhaul rules on student debt forgiveness

By law, students can apply to have their federal loans discharged if they can prove a school used illegal or deceptive tactics in violation of state law to persuade them to borrow money for college.

Learn more about for-profit colleges:

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How dozens of failing for-profit schools found an unlikely savior: a debt collector