U.S. Department of Education shuts down colleges across the nation

On September 6th, 2016 over 40,000 students in 38 states across the U.S. received the disparaging news that ITT Technical Institute would be closing its doors due to bankruptcy. This news came as a shock to its students, especially those that were less than one semester away from graduation. On August 25th, 2016, just a couple of days before the shutdown, ITT Technical Institute received notice from the U.S. government that they were no longer eligible to receive federal student aid.

In their official blog, The U.S. Secretary to the Department of Education posted a letter to ITT Technical Institute students in which it is stated:

“In recent years, ITT has increasingly been the subject of numerous state and federal investigations. In August, ITT’s accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) determined that ITT “is not in compliance, and is unlikely to become in compliance with [ACICS] Accreditation Criteria.” This came amid increasingly heightened financial oversight measures put in place by the Department over the past two years due to significant concerns about ITT’s administrative capacity, organizational integrity, financial viability, and ability to serve students.”

Although ITT Technical Institute has made the most commotion, research from Business Insider and Bloomberg shows that in the past 25 years there have been close to 129 colleges and universities who have either shut down or merged with other institutions as a result of financial mis-management. While the reliable resources have not been able to find any apparent trends, experts say that this is just the beginning of the shutdowns to come.

Many colleges and universities have seen a decrease in their enrollment by more than five percent, which does not seem like much until you do the math. Celebrity investor and business mogul, Mark Cuban, bought the domain name www.collegedebt.com, which gives you an up to the second account of the amount of growing college debt in the U.S. Cuban states to Business Insider:

“A tiny drop in enrollment can have a big impact on a college that charges $40,000 a year, Cuban said. Losing 500 students would put such a college $20 million a year short. Losing 1,000 moves that number to $40 million.”

In 2015, the shutdown of Sweet Briar College began to command the attention of all of the shutdowns. Experts say parents and students are realizing the potential debt pursuing a degree can have on one’s financial status and quality of life. Many institutions of higher education have been under scrutiny by government, and their accrediting organizations for what some would call predatory lending practices. Many experts on the subject matter predicted the crisis, and have compared multiple institutions of higher education’s financial aid and lending practices to that of the housing crisis many years ago. In an effort by the U.S. government to increase the amount of students attending colleges and universities, the process of lending to students became more lenient, which resulted in institutions becoming more dependent on federal funding.

 

Watch this video to understand more about the student loan crisis.

We want our clients and community to make informed decisions about choosing an institution of higher education and student loans. So how do you prevent this from happening to you or members of your family still attending school?

It is suggested that you keep a close eye on the school of your choice by periodically checking the U.S. Department of Education’s College Score Card. In this publication, parents and students can monitor things like:

  • Affordable Four –Year Schools with Good Outcomes
  • 25 Community Colleges that Advance Opportunities for Low-Income Students
  • 26 Four-Year Public Colleges with Low Costs and High Salaries

You can also check out this video by the U.S. Department of Education on why College Score Card is the most viable resource for students seeking higher education.

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Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.