Millions in student loan cash disappears as an inexperienced college chain crumbles
When the Education Department approved a proposal by Dream Center, a Christian nonprofit with no experience in higher education, to buy a troubled chain of for-profit colleges, skeptics warned that the charity was unlikely to pull off the turnaround it promised. What they didn’t foresee was just how quickly and catastrophically it would fail.
Barely a year after the takeover, dozens of Dream Center campuses are nearly out of money and may close as soon as today. More than a dozen others have been sold in the hope they can survive.
The affected schools – Argosy University, South University and the Art Institutes – have about 26,000 students in programs spanning associate degrees in dental hygiene and doctoral programs in law and psychology. Fourteen campuses, mostly Art Institute locations, have a new owner after a hastily arranged transfer involving private equity executives. More than 40 others are under the control of a court-appointed receiver who has accused school officials of trying to keep the doors open by taking millions of dollars earmarked for students.
The problems, arising amid the Trump administration’s broad efforts to deregulate the for-profit college industry, began almost immediately after Dream Center acquired the schools in 2017. The charity, started 25 years ago and affiliated with a Pentecostal megachurch in Los Angeles, has a nationwide network of outreach programs for problems like homelessness and domestic violence and said it planned to use the schools to fund its expansion.
Now its students – many with credits that cannot be easily transferred – are stuck in a meltdown. On Wednesday, members of the faculty at Argosy’s Chicago and Northern Virginia campuses told students that they had been fired and instructed to remove their belongings. In Phoenix, an unpaid landlord locked students out of their classrooms. In California, a dean advised students two months away from graduation not to invite family to attend from out of town.
“In less than a month, everything I have worked for the past three years has been taken from me,” said Jayne Kenney, who is pursuing her doctorate in clinical psychology at Argosy’s Chicago campus. “I am also conscious of the fact that what seems like the swift fall of an ax in less than one month has in reality been festering for years.”
The fall accelerated last week when the Education Department cut off federal student loan funds to Argosy after the court-appointed receiver said school officials had taken about $13 million owed to students at 22 campuses and used it for expenses like payroll. The students, who had borrowed extra money to cover things like rent and groceries, were forced to use food banks or skip classes for lack of bus fare.
Lauren Jackson, a single mother seeking a doctorate at the Illinois School of Professional Psychology, an Argosy school in Chicago, did not receive the roughly $10,000 she was due in January. She has been paying expenses for her and her 6-year-old daughter with borrowed money and GoFundMe donations. On Tuesday, after three months of not paying her rent, she received an eviction notice.
“I didn’t want to go home and tell my baby that Mommy may not be a doctor,” said Jackson, whose school could close today. “Now I don’t want to go home and tell her that we don’t have a home.”
Led by Secretary Betsy DeVos, the Education Department has reversed an Obama-era crackdown on troubled vocational and career schools, allowing new and inexperienced entrants into the field.
“The industry was on its heels, but they’ve been given new life by the department under DeVos,” said Eileen Connor, director of litigation at Harvard Law School’s Project on Predatory Student Lending.
DeVos, who invested in companies with ties to for-profit colleges before taking office, has made it an agency priority to unfetter for-profit schools by eliminating restrictions on them. She also allowed a growing number of for-profit schools to evade even those loosened rules by converting to nonprofits.
That’s what Dream Center wanted to do when it asked to buy the remains of Education Management Corp. But Dream Center had never run colleges. Alarms were ringing from the moment the takeover was proposed. Dream Center’s effort to buy the failing ITT Technical Institutes schools had fallen apart after resistance from the Obama administration. When it asked to buy Education Management’s schools, consumer groups, members of Congress and some regional accreditors raised concerns. But in late 2017, DeVos’ agency gave preliminary approval to Dream Center’s plan.
Lauren Jackson, a student at Argosy University, and her 6-year-old daughter, Brooklynn Franklin, are being evicted from their Chicago apartment. Jackson, who did not receive the roughly $10,000 she was due in January, is one of thousands caught in the meltdown at Dream Center.