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FSA Allows Orderly Wind-Down of Program Participation to Protect Students
Following a thorough investigation, the U.S. Department of Education’s office of Federal Student Aid (FSA) informed Florida Career College (FCC) today that its application to continue to participate in the federal student aid programs has been denied. FCC’s application was denied based upon evidence demonstrating:
Violations of the ability-to-benefit (ATB) regulations, which govern when a student who does not have a high school diploma or its equivalent can receive federal student aid;
Failure to meet the fiduciary standard of conduct; and
Failure to meet the standards of participation, including the standards of administrative capability.
FCC has the option to allow students who are currently receiving federal student aid to continue their educational programs until the fall. FSA is taking this step to minimize disruptions to the education of current students and allow those who so choose to complete their programs if possible.
“Federal Student Aid is holding Florida Career College accountable for taking advantage of some of the most vulnerable students,” said FSA Chief Operating Officer Richard Cordray. “Despite the school’s actions, they have an opportunity to do right by some of these students.”
In July 2022, FSA placed FCC on Heightened Cash Monitoring 2 (HCM2), which provides additional oversight to safeguard taxpayer dollars, based on its initial investigative findings. In October 2022, FSA notified FCC of issues uncovered in the investigation and gave the school an opportunity to respond.
FCC’s provisional participation in the federal student aid programs expired on Sept. 30, 2022. FSA then authorized FCC’s participation on a month-to-month basis while the school’s recertification application was pending as is required by higher education regulations.
Violations of the ATB regulations
A student who has neither a high school diploma nor its recognized equivalent may be eligible to receive federal student aid by passing an approved ATB test. The purpose of the ATB test is to determine whether a student who does not have a high school diploma can benefit from postsecondary education. Among other things, this protects students from ending up with debt they cannot afford. Students who pass the test can access federal student aid to pursue postsecondary education.
The ATB regulations establish criteria to ensure, among other things, that an ATB test is administered independently from the school the student seeks to attend. During its investigation, FSA found that proctors administering ATB tests for FCC routinely broke the rules governing test administration, including by filling in or changing answers after students finished their tests, helping students during testing or taking tests for them, and permitting students to use calculators in violation of testing rules. FSA also found that FCC employees and employees of its parent company, International Education Corporation (IEC), knew about and encouraged violations of the ATB testing process to affect test outcomes. For example, FCC and IEC senior leaders tracked proctor pass rates and sought to replace proctors with low pass rates, and they picked the supposedly “independent” proctors they wanted to administer ATB tests at FCC campuses. FCC and IEC officials also pressured proctors to pass students and otherwise inappropriately inserted themselves into ATB test administration and proctor training in order to increase passage rates and subsequent enrollments.
FCC enrolled a significant portion of its students through the ATB testing process. Since 2018, between 43% and 48% of FCC students enrolled at the school through ATB testing. Furthermore, FCC and another school owned by IEC accounted for nearly 75% of all ATB enrollments nationwide during the 2021-22 award year.
FCC’s pervasive violations of the rules and regulations governing the ATB testing process harmed students. In ATB testing, it is equally important to identify applicants who do not have the ability to benefit from academic training as it is to identify those who do. From 2016 to 2021, more than 50% of ATB students withdrew from FCC without completing their 10-month certificate program. Additionally, from award year 2018–19 through award year 2021–22, more than 80% of ATB students who withdrew from FCC still incurred debt or exhausted their Federal Pell Grant eligibility or both.
Failure to meet the fiduciary standard of conduct
Schools and the owners of the schools that participate in the federal student aid programs must adhere to a fiduciary standard of conduct and must act with the competency and integrity required as a fiduciary.
FSA found substantial evidence that FCC leadership engaged in longstanding and systematic manipulation of ATB testing to ensure that pass rates would maximize ATB enrollments. This misconduct extended to the highest levels of FCC and its parent company, IEC.
Proper administration of the ATB program enhances educational opportunities for vulnerable students who seek postsecondary education and training despite their lack of a high school diploma. FCC’s efforts to maximize enrollment without regard for a student’s true ability to benefit imposed serious harms on many of its students. It also harmed taxpayers, who are often left on the hook when students are unable to benefit from their programs and repay their loans. This misconduct demonstrated a lack of integrity inconsistent with the expectations of a fiduciary.
Failure to meet the standards of participation, including the standards of administrative capability
To participate in the federal student aid programs, schools sign a Program Participation Agreement and, in doing so, agree to adhere to all applicable statutory and regulatory provisions and to competently administer the programs with adequate internal controls.
Evidence shows that FCC knew or should have known about potential problems with its administration of ATB testing at least as early as May 2020, yet the school appeared not to conduct meaningful internal audits and compliance monitoring of ATB testing. This, among other factors, demonstrates that FCC lacks adequate checks and balances in its system of internal controls, as required by regulation. FCC’s failure to adhere to the statutory and regulatory provisions applicable to ATB testing also establishes that FCC failed to administer the programs competently or in accordance with all statutory and regulatory provisions.
Protecting Students
As of late 2022, FCC enrolled nearly 5,000 students in short-term programs according to data the school provided to its accreditor. If FCC agrees to minimize disruptions to students, those currently enrolled and receiving federal student aid can maintain their aid to continue their educational programs at FCC, if the students so choose, through Sept. 30, 2023. This would allow most, if not all, of FCC’s students to obtain sufficient federal student aid to pay for the entirety of the tuition charges to complete their programs. FSA will not allow FCC to enroll any new students using federal student aid during this time.
Additional conditions FCC must meet to maintain access to federal aid programs until Sept. 30 include detailed monthly reporting to the Department; an updated teach-out plan and reporting on teach-out agreements with other area schools; continued participation under HCM2 status; a letter of credit; and clear communication with students about their status and education options.
If FCC opts to not accept FSA’s conditions for continued federal grant and loan funding for current students, FSA will end the school’s participation in the federal student aid programs effective April 30, 2023.
FCC must notify FSA whether it will continue participation with these conditions no later than April 18, 2023. FCC also can seek reconsideration of the recertification denial by submitting evidence to dispute FSA’s findings by April 25, 2023. If any such evidence is submitted, FSA will evaluate it and notify the school about whether the denial of its reinstatement application will be modified, rescinded, or remain in place.
FSA will communicate directly with FCC students to explain today’s decision and post information online at StudentAid.gov/floridacareer.
FSA will continue to communicate as next steps and options become clear. The goal is to equip FCC students with the information needed to make a well-informed decision about next steps and their educational futures. FSA is also poised to collaborate with state partners and the school’s accrediting agency to support students as FCC exits the federal student aid program. That work will include helping students understand their options to enroll at another school or apply for loan discharge, such as a false certification discharge if they were wrongfully enrolled through ATB testing.
Today’s actions reflect FSA’s commitment to support the needs of America’s students and borrowers and hold postsecondary schools accountable for misconduct.
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