The Art Institute was in trouble. Why didn’t anyone protect students? (Opinion)

Last month, about 1,700 college students from eight Art Institute college campuses — including one here in Houston — opened their e-mail to learn they had one week until their school would close permanently. Students and faculty were shocked and disheartened by the news, which arrived with virtually no notice. Students were left to sort out their options for continuing their education, transferring to another school, and for many, managing significant debt loads that may soon enter repayment. To close watchers of the higher education industry, the news was less of a surprise. This educational crisis should be a wake-up call for regulators to up their game and protect students from the next precipitous closure — before it is too late. After all, Art Institute schools have a long and sordid history. The for-profit college chain was owned by a large company that faced allegations of illegal recruiting practices across 39 states and Washington, D.C., and numerous lawsuits alleging fraud. The company ultimately agreed to a historic $95 million settlement with the U.S. Department of Justice. FROM THE NEWSROOM: Art Institute of Houston permanently closes without clear reason By the end of 2018, the chain had cycled through different owners, the schools were teetering on the edge of financial collapse and some campuses had lost accreditation — a stamp of approval required for a school to be eligible for federal financial aid. Student Defense, where one of us works, filed a class-action lawsuit against the Illinois Institute of Art (along with its new owners and key executives), which concealed from students the fact that it had lost accreditation so they would keep paying tuition bills. Many Art Institute schools shuttered completely as allegations mounted and financial ruin became inevitable. The last eight campuses were sold off again in early 2019 — the same eight campuses that closed permanently last month. Unfortunately, the students affected by these closures join an unlucky group of nearly a quarter of a million other students whose schools closed between 2010 and 2020 — more than four in five of them at for-profit colleges. Closure is a significant derailing event: In recent years, 43% of students impacted by college closures never graduate. Their time and money goes wasted. The promise of education as a step up the economic ladder goes unfulfilled. So what can regulators do to protect students from the next Art Institute? For starters, the accrediting agencies charged with overseeing colleges’ quality and finances must intervene when the risk of a college’s closure becomes real. Just as the time to write out a will is not on a deathbed, schools at high risk of closure must be required to take seriously contingency planning before the decision is made to close. Only through careful planning can a school ensure that its students have good information and options when a once-unexpected closure becomes reality. HELPING HAND: HCC offers help to Art Institute students, faculty left in limbo after sudden closure Accrediting agencies have long tried to evade this responsibility, arguing that even talking about closure makes it a self-fulfilling prophecy. But when these regulators are asleep at the wheel, the alternative — rushed, unplanned, precipitous closures without transition plans or clear communications — is devastating for both students and taxpayers. Regulators also need to ensure colleges pay the price when they allow an irresponsible closure to happen. After a college closes, students unable to graduate are generally eligible to have their federal student loans forgiven. And while federal law allows the Department of Education to recover the costs of forgiveness from the institution, institutions’ bank accounts are usually empty when that time comes, and owners of the schools have run for the hills. Taxpayers are left absorbing the costs. For this reason alone, colleges at a high risk of closure should be expected to put up financial protection in the event of their collapse. College owners — some of whom profit immensely from the federal loan system — should be personally on the hook for those costs. As-yet unfinished regulations from the U.S. Department of Education would advance these efforts. Those rules should be finalized and implemented as quickly as possible — before the next catastrophic closures. Finally, policymakers need to get ahead of these issues and stop spending taxpayer dollars — and leaving borrowers with exorbitant levels of student loan debt — on programs and institutions that leave students behind. Even before its sudden closure, the Art Institute schools failed to improve students' economic outcomes, all while continuing to feed off the federal spigot. Fortunately, new “gainful employment” rules from the Biden administration will cut off career-oriented college programs that leave graduates with unmanageable debt or earnings lower than if students had never gone to college in the first place. These rules need to be implemented as soon as possible, and Congress must provide even stronger front-end protections to ensure limited federal dollars are only going to programs that provide value for students. And the U.S. Department of Education must more rigorously oversee all institutions to ensure that they are serving students well. Precipitous college closures have become all too common in higher education — and regulators have allowed schools to get away with it, kowtowing to institutions’ self-interested demands for less oversight and enabling their worst business practices at the expense of students. To stop the cycle of these closures, policymakers need to act. Kelly McManus is the vice president of higher education of Arnold Ventures, a Houston-based philanthropic organization. Daniel Zibel is the vice president, chief counsel, and cofounder of Student Defense, a nonpartisan organization dedicated to protecting students and promoting accountability in higher education.

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The Art Institute was in trouble. Why didn’t anyone protect students? (Opinion)

The school's sudden closing should be a wake-up call for regulators to up their game

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