In almost every way, the chain of colleges operated by the nonprofit Center of Excellence in Higher Education is in big trouble.

Colleges, which were previously part of the for-profit college empire of Carl Barney, have all been put probation by their accreditor since 2018 due to low graduation and placement rates and questions about the accuracy of the information provided to the accreditor. All 15 of the chain’s sites, except two, are in the process of shutting down.

The center and its colleges are under investigation by the Federal Office for Financial Consumer Protection, which also filed a complaint in the case, to compel the center to testify regarding the organization’s private student loan program. Last year a Colorado court find her vsenter and its guilty leadership consumer fraud and fined him $ 3 million.

Despite all of this, colleges remain eligible to receive tens of millions of dollars in federal student aid under a temporary agreement with the US Department of Education. But the deal could end, experts say, under a presidential administration determined to bring more control to the owner colleges. And without the flow of federal dollars, colleges could be forced to close.

The centre’s colleges are among more than 130 institutions, almost all for-profit, that operate under a provisional or monthly agreement with the department due to questionable transactions or a proposed change of ownership, according to a recent report by the Century Foundation. The arrangements give the department broad power to exclude colleges from the federal student aid program, said Yan Cao, a senior researcher at the foundation and one of the report’s authors.

President Biden said his administration will seek to “prevent for-profit education programs from taking advantage of students,” and his appointees are set to renew several regulations that would hold these institutions accountable for their graduates’ incomes and limit access to dollars. federal for colleges that violate these rules.

While these regulatory efforts will take years to complete, education ministry officials could terminate the interim agreements much more quickly.

These are “fruits at hand,” said Amy Laitinen, director of higher education at New America, a left-wing think tank. “I would be surprised if they didn’t consider things like this.”

Likely targets

Eric S. Juhlin, CEO of the Center for Excellence in Higher Education, downplays his stakes. He said his colleges were “on a solid financial footing”, with strong enrollments of around 10,000 total students, and called probation “a creditor’s tool”, not a negative action. . The center is also appealing the conviction for fraud, which it called a “completely wrong decision”.

But Juhlin said he was concerned about the ministry’s regulatory agenda. “It is already clear that this department is seeking to undo or reverse some actions of the previous administration,” he said.

Many new appointees to the Department of Education served under President Barack Obama, when the agency put in place several new regulations intended to hold owner colleges accountable. These measures included the so-called gainful employment rule, which compared the earnings of career college graduates to their student loan debt, to see if they were struggling with unpayable debt, and created a way for borrowers to collect their student loans. if their college suddenly closed or defrauded them.

Former Education Secretary Betsy DeVos, who served under Biden’s predecessor, broke those rules, which a judge had already partially struck down, and worked to protect private colleges as part of a massive program to deregulate higher education.

Under DeVos, the department also gave Barney, the for-profit mogul, permission to convert his colleges into non-profit institutions, a move that would allow them to receive more than 90 percent of their income from Pell Grants, for low income students; and federal student loans.

Today, under the leadership of new Education Secretary Miguel A. Cardona, the ministry said it will seek to renew Obama-era regulations, but the process to do so is long and almost certainly will be. faced with political pushbacks and legal challenges. Even if the regulations come into force, it will be several years before the institutions suffer the consequences.

Therefore, colleges operating under interim agreements are likely targets.

Once colleges are placed on interim status to receive federal student aid, the department can immediately revoke their access, said Dan Zibel, vice president and chief counsel for the National Student Legal Defense Fund. Such a revocation remains in place even if a college appeals the decision to the department and the courts, said Zibel, a former lawyer with the agency.

For the ministry, revocation is a much more effective way to enforce accountability for colleges with poor student performance, precarious finances, or violations of federal rules. And this is a tactic often used under Obama.

During the last three years of the Obama administration, the department announced that it had halted federal aid to some 30 colleges that were operating under temporary arrangements – essentially, a death knell for dozens of campuses that did not. could not stay in business without the flow. federal dollars.

Help students

The list of colleges now under temporary agreements with the ministry includes some of the largest institutions in the for-profit sector. Among them is Walden University, currently under investigation by the Justice Department to find out if it deceived nursing students about the availability of clinical placements and other matters. Its owner, Laureate Education, is looking to sell Walden to Adtalem Global. Two of Adtalem’s investors, who say the decision buying Walden has “destroyed shareholder value,” are urging the company wait for the sale to close until the results of the federal investigation are known. A spokesperson for Laureate said the company was “optimistic” that the sale would close in the second half of the year.

Another prominent for-profit university, American Intercontinental University, owned by Perdoceo Corporation, had a tentative deal that expired in late March. In 2019, the company, formerly called Career Education Corporation, settled an investigation by the 50 state attorneys general by paying more than half a billion dollars for using inflated placement rates to recruit students.

Perdoceo has closed or consolidated several campuses, and even postponed taking federal dollars, to comply with federal rules that limit the percentage of federal aid owner colleges can receive, according to analysis by BMO Capital Markets.

The company did not respond to a request for comment.

Advocates of the exclusive college industry say the Education Department is responsible for overseeing federal student aid programs, but shouldn’t just target the for-profit sector.

“It would be inappropriate for the department to politicize the eligibility and certification process simply based on an institution’s tax status,” said Nicholas Kent, senior vice president of policy and regulatory affairs at Career Education Colleges and Universities , an association which mainly represents owner colleges. .

The bottom line for Cao of the Century Foundation is that colleges are not automatically entitled to federal student aid funds, and the ministry has a duty to protect the people who actually receive the money.

“The idea of ​​Title IV,” she said, “was that the funds would only be available for schools to help students.”

Dan Bauman contributed to this article.