Hundreds of for-profit colleges could close, leaving up to 600,000 students scrambling to find other schools, after the Education Department withdrew recognition of the nation's largest accreditor of for-profit schools.
The Accrediting Council for Independent Colleges and Schools said it would appeal Thursday's decision to Education Secretary John B. King Jr.
ACICS oversees thousands of students at for-profit colleges including Harrison College in Indianapolis, which has 3,000 students. It also sanctions out-of-state operators with significant local operations, including Pittsburgh-based Education Management Corp., which operates Brown Mackie College and the Art Institute of Indianapolis.
Harrison College CEO James Hutton said the school was taking all necessary steps to remain in compliance with Department of Education requirements to receive federal financial aid, and was shopping for a new accreditor.
"In anticipation of this decision, Harrison has been meeting with alternative accreditors," Hutton said in an email to IBJ. "After discussions with high-ranking officials of one national accreditor, who just received a five-year renewal of recognition from the DOE, (Harrison) has begun the accreditation process with this accreditor, and this accreditor will travel to Indianapolis in November to conduct a workshop for Harrison as part of this process."
In a statement, ACICS Interim President Roger Williams said the council would "continue diligent efforts to renew and strengthen its policies and practices" to meet the department's criteria for accreditors.
The accrediting agency has been accused of lax oversight of its schools, which included those once owned by the now-defunct Corinthian Colleges Inc. and the recently closed ITT Technical Institute, which was operated by Carmel-based ITT Educational Services Inc.
The department's decision was announced in a blog post on its website.
Harrison College was founded in 1902 as Indiana Business College.
Harrison College spokeswoman Becky Polston told IBJ in a statement last month that, even if the federal government’s final decision was to shut down ACICS, a transition process would take about 18 months, during which time students still would receive federal aid and the college would remain accredited.
If necessary, she said, Harrison will seek accreditation through another group.
“Harrison has been accredited continuously by ACICS since 1980 and has maintained complete compliance with ACICS requirements since that time,” according to the statement.
In a letter to the council released later Thursday, Emma Vadehra, King's chief of staff, wrote that "ACICS' track record does not inspire confidence that it can address all of the problems effectively."
Vadehra said the department found fundamental problems with the council's work as an accreditor. Her decision followed staff and advisory panel recommendations to sever ties with the council.
If ACICS loses its appeal, hundreds of schools would be forced to find a new accreditor within 18 months or lose their ability to participate in federal financial aid programs, such as student loans and Pell Grants. About 600,000 students attend ACICS-accredited institutions, Williams said.
While the appeal is pending, ACICS retains its federal recognition and remains determined to fully execute its accreditation responsibilities in a professional manner, he said.
Thursday's decision was met with praise from Democratic lawmakers.
"Accreditors are supposed to be watchdogs, but this negligent agency rubber-stamped shady institutions like ITT and Corinthian for years, right up until the moment they collapsed," said Sen. Elizabeth Warren of Massachusetts.
But Steve Gunderson, president of Career Education Colleges and Universities, an industry lobbying group that represents for-profits, said the decision will have "horrible ramifications for hundreds of thousands of students, thousands of dedicated faculty and staff, and hundreds of communities and employers that rely on institutions accredited by ACICS."
Rep. John Kline, R-Minnesota, chairman of the House Committee on Education and the Workforce, echoed those concerns. "Hundreds of colleges will be forced to scramble to find a new accreditor so students don't lose their aid and everything they've been working toward," Kline said.
Advocacy groups, lawmakers and others have long complained about the council. It has been accused of continuing to accredit schools under investigation for falsifying job placement rates and claims for federal aid, illegal recruiting practices and misleading marketing claims.
The council allowed Corinthian Colleges, one of the largest chains of for-profit colleges, to continue to receive accreditation even while it was under investigation for fraud. Corinthian sold many of its campuses, closed others and filed for bankruptcy protection last year. Thousands of its former students are asking the Education Department to forgive their federal loans, in a taxpayer bailout that could top $3 billion.
And earlier this month, ITT Technical Institute announced it was shutting down all 130 of its U.S. campuses, leaving more than 35,000 students scrambling across more than 30 states. The chain was banned in late August from enrolling new students who used federal financial aid because Education Department officials said the company had become a risk to students and taxpayers.