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Department of Education’s Federal Student Aid Denies Reinstatement Application of For-Profit Law School

Today, the office of Federal Student Aid (FSA) in the U.S. Department of Education (ED) informed Florida Coastal School of Law that its application for reinstatement to participate in federal student aid programs has been denied. The action delivers on President Biden’s commitment to stop for-profit education programs from profiteering off students and comes as U.S. Secretary of Education Miguel Cardona and new FSA chief Richard Cordray are stressing that for-profit schools will be held accountable for meeting the standards for participation in the Department’s Title IV programs.

“Too often, we see for-profit schools that try to take advantage of students, misuse taxpayer dollars, and skirt the rules to participate in federal student aid programs,” Secretary Cardona said. “Today we want to be heard and understood by for-profit schools around the country: we will be vigilant in ensuring they meet their commitments to students, families, and taxpayers.”

The reinstatement application for Florida Coastal School of Law was denied for three reasons:

  • Failure of the financial responsibility standards:
  • Failure to meet the fiduciary standard of conduct; and
  • Failure to meet the standards of participation, including the standards of administrative capability.

“Florida Coastal School of Law operated recklessly and irresponsibly, putting its students at financial risk rather than providing the opportunities they were seeking,” said Cordray. “Our commitment is to stand up for all students and ensure their institutions are held to the standards our students and communities expect and deserve.”

Today’s notification comes after the school’s contract with the Department expired on March 31, 2021, when required Florida Coastal School of Law officials refused to sign the contract, effectively ending the school’s participation in the federal student aid programs. In early April, Florida Coastal School of Law applied for reinstatement.

Below are additional details regarding the denial of Florida Coastal School of Law’s reinstatement application:

Failure of the financial responsibility standards

The federal Higher Education Act requires institutions to meet general standards of financial responsibility to participate in the federal student financial aid programs. Florida Coastal School of Law failed to meet these standards because its financial composite score for the past two fiscal years was -1.0, the lowest possible score. The institution carried significant debt due to a declining student population and issues surrounding the closure of two other schools that were also under the same ownership: Charlotte School of Law in Charlotte, North Carolina and Arizona Summit Law School in Phoenix, Arizona.

Additionally, the audited financial statements for Florida Coastal School of Law contain a disclosure that raises substantial doubt about its ability to continue operations. Last month, the private equity firm that had owned 98.6% of the institution relinquished its ownership. This move demonstrated its unwillingness to assume any potential liabilities related to noncompliance rather than using its resources to support the school’s continued participation in the federal student financial aid programs.

The institution’s accreditor also found that Florida Coastal School of Law was violating other standards, such as failing to provide critical services that it advertises and failing to meet its obligations to correctly determine student eligibility for the federal student financial aid programs. FSA therefore determined that the institution failed the financial responsibility standards set by federal law.

Failure to meet the fiduciary standard of conduct

Institutions—and the owners of the institutions—that participate in the federal student financial aid programs must adhere to a fiduciary standard of conduct and must act with the competency and integrity required as a fiduciary. In ongoing discussions for over two years, officials at Florida Coastal School of Law did not meet these standards by failing to notify FSA about accreditation issues and other significant developments related to the institution’s ownership structure.

Failure to meet the standards of participation

To participate in the federal student financial aid programs, institutions must adhere to all applicable statutory and regulatory provisions and must competently administer the programs with adequate internal controls. By not disclosing its accreditation and ownership issues, Florida Coastal School of Law failed to meet the standards of participation.

Further steps

Florida Coastal School of Law has 10 days from receipt of today’s notification to submit factual evidence to dispute FSA’s findings and seek to demonstrate their inaccuracy. If any such evidence is submitted, FSA will evaluate it and notify the institution about whether the denial of its reinstatement application will be modified, rescinded, or remain in place.

The Department is poised to collaborate with state partners and the school’s accreditor to support students if Florida Coastal School of Law closes precipitously. The Department’s work would include helping students understand their options to transfer their credits to another school or apply for a closed school loan discharge.

Today’s actions are part of a broader effort by ED to support the needs of America’s students and borrowers and hold for-profit institutions accountable if they fail to serve students well. In addition to today’s announcement, the Department recently streamlined the borrower defense relief process, helping approximately 72,000 borrowers whose institutions engaged in certain misconduct receive $1 billion in loan cancellation. The Department also has taken a series of steps to provide relief to borrowers during the pandemic, including extending the pause on student loan payments, affecting 40 million borrowers across the country, and ensuring hundreds of thousands of borrowers who have received student loan discharges due to total and permanent disability can keep their discharges.

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