Education Corporation of America shuts down after ACICS pulls accreditation

Education Dive

Dive Brief:

  • One of the largest for-profit college operators still standing, Education Corporation of America, is shutting down entirely. “[I]t is with a heavy heart that today we announce that [ECA] is closing all its career colleges effective with the completion of the current module or term for most students,” Diane Worthington, ECA’s vice president of marketing communications, wrote in a statement emailed to Education Dive on Wednesday.
  • The dramatic move follows the suspension on Tuesday of accreditation for ECA-owned Virginia College as well as several Brightwood Career Institute campuses by the Accrediting Council for Independent Colleges and Schools (ACICS). In a press release emailed to Education Dive, ACICS cited concerns about “student progress, outcomes, student satisfaction, certification and licensure, and staff turnover.” ECA operates more than 70 campuses, reaching around 20,000 students, under the Virginia College, Brightwood and other banners.
  • ECA CEO Stu Reed told students in a letter that the Department of Education — which ECA sued this fall as part of an attempt to avoid bankruptcy — added new requirements to the chain “that made operating our schools more challenging,” ​according to a copy of the letter obtained by a CBS affiliate in South Carolina (among other outlets) and posted to Twitter. The requirements, plus the accreditation loss, made it impossible for ECA to acquire new capital to keep operating, according to Reed.

Dive Insight:

Facing multiple possible evictions and mounting distress, ECA in September announced a plan to close about one-third of its campuses. That plan was meant to keep the remainder of the college chain solvent and its remaining students on track to finish their programs. But now the lights are going out across ECA’s entire footprint as it faces compounding financial and compliance woes, leaving thousands of students in the lurch.

ACICS determined this fall that ECA’s Virginia College, which enrolls roughly 15,000 students, was “unlikely to be able to continue operations and meet its financial obligations based on its current financial status,” according to the release sent Wednesday. In its decision, ACICS considered information Virginia College provided that reported a quarterly loss of 16.4%, according to a letter sent by ACICS to ECA on Tuesday.

The accreditor also alluded to Virginia College’s “likely inability to continue operations on Heightened Cash Monitoring 2,” a condition the Education Department imposes in which an institution can no longer receive advanced financial aid funds and must instead pay up front and then request reimbursement from the department.

Students will be able to complete the current term, which ends this Friday, Worthington said. ACICS said in its statement that Virginia College will be required to prove students slated to graduate in December were able to do so. Some have criticized the absence of a predetermined teach-out plan, which is common when a campus shutters. ECA-owned New England College of Business, which is not accredited by ACICS, will remain open, according to an official with the college.

Worthington said ECA “will work with students to ensure access to their transcripts so they can complete their studies at another school.” She added, “This is not the outcome that we envisioned and is one that we recognize will have a dramatic effect on our students, employees, and many partners.”

Ed. Department spokesperson Liz Hill, in a statement emailed to Education Dive, described ECA’s decision to close suddenly as “highly disappointing and not best for its students,” adding that “[i]nstead of taking the next few months to close in an orderly fashion, ECA took the easy way out and left 19,000 students scrambling to find a way to finish” their programs.

In a statement emailed to Education Dive, Steve Gunderson, president and CEO of Career Education Colleges and Universities (CECU) — the for-profit college sector’s primary trade association — joined the Education Department in condemning the sudden closure of ECA’s campuses. Gunderson said CECU has been reaching out to other college leaders across the country asking them to take students left in limbo as ECA shuts down. “We understand business decisions,” he said. “But, sudden closures are the worst moments for our sector because they provide no time for students to transfer; and no time for staff to prepare. Thoughtful planning and communications can avoid such challenges.”

ECA’s collapse echoes that of other major for-profits, namely ITT Technical Institute and Corinthian Colleges, both of which faced tighter regulations during the Obama administration after the companies were accused of predatory marketing practices and low-quality education that left students jobless and indebted.

ACICS was also the accreditor for ITT and Corinthian. In December 2016, ACICS lost its federal recognition, required for access to Title IV funds, when the Obama administration tightened the rules for accreditors. Late last month, Education Secretary Betsy DeVos permanently reinstated recognition for ACICS after temporarily restoring recognition earlier this year.

Critics have noted ACICS is still not in compliance with two of 21 Ed Department standards for hiring qualified employees and policies to avoid conflicts of interest.