Another For-Profit School Swirls the Toilet Bowl. Argosy University Next to Vanish?

Yesterday I wrote about how the Department of Education was going to forgive money missing from Argosy University that was supposed to have been distributed to students from their federal financial aid. This money would be used by students for silly things like rent, food, books, etc.

Well, it turns out Mark Dottore, the court-appointed Receiver in the case, now says the missing $13 million is kind of accounted for but still missing in the ether.

Dottore acknowledges how important the money owed to the students is. He says, “Student Stipends are monies, borrowed by students and used by them to pay for their living costs and expenses while they are taking academic courses and studying at Argosy University campuses. For many (if not all) students, the Student Stipends are critical necessities, as the students have already borrowed the money and they have no other source of income while they are studying. Moreover, the students have counted on this money to insure that they can focus effectively on challenging academics in their program degrees.”

The Receiver discloses that the students are owed the money by Argosy University but the reason the money is missing is that the school was in such poor financial shape that it did not have the funds to disburse to the students and then get repaid by the Department of Education.

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A court filing says, “Because the receivership never had sufficient resources to pay the Student Stipends, it could not advance the money; because the funds could not be advanced, the DOE regulations state that it is under no obligation to reimburse. To put it bluntly, the payment of the Student Stipends is stalled over a “chicken and egg” debate. ”

So what makes this mess even more confusing is the Department of Education is apparently willing to forgive the $13 million owed to students that were never disbursed. This seems to turn what appeared to be a reasonable and compassionate act to a duh.

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The Receiver did previously disclose that school funds “were depleted partly through fees paid out to a for-profit firm, Studio Enterprises, that had a services agreement with DCEH. That was part of a deal to spin off eight Art Institutes previously owned by DCEH and put them under control of another nonprofit, Education Principle Foundation (EPF). According to Dottore, DCEH paid money to Studio for services it never provided and was owed millions from Studio for DCEH services to the spun-off schools.”

Students are reasonably worried that the schools part of the faith-based Cream Center Education Holdings, the parent company of Argosy University and others, may fold in financial disaster.

Based on the outcomes of other similarly strapped schools in the past like the schools of Education Corporation of America, there is a real danger of the Argosy University sister schools also closing their doors suddenly, leaving students stranded. If that happens, students with private student loans will be on the hook for their loans with no chance of forgiveness.

Any student who is worried about the potential for a school closing should talk to local schools now to see if their credits would be transferable in the event of a lights out situation.

If that happens, all students who owe federal student loans should become familiar with the Closed School Discharge for federal student loan forgiveness.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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