Dana College, a small, financially struggling institution in Nebraska that had sought a path back to solvency through a sale to private investors, announced on Wednesday that the sale would not proceed and that the college would close because its accreditation would not transfer to the potential new owners.
The investor group that had formed to buy the college, an entity called Dana Education Corporation, had said in March that it planned to maintain a residential campus but also offer online courses. The college's accreditor, the Higher Learning Commission of the North Central Association of Colleges and Schools, cited the planned online courses among its reasons for denying the institution's request for its accreditation to continue after a change of control.
According to the Lincoln Journal Star, the commission said the transfer proposal failed to demonstrate sufficient continuity of the college's mission and educational programs, and to show that the college's "institutional and educational integrity" would be protected.
In an online statement, Dana College officials criticized the Higher Learning Commission's decision as "inaccurate, unfair, and based on speculation and information not included in the required change-of-control request. "
"We are devastated that despite meeting all requests and assiduously working to meet all requirements, the HLC decision does not allow for Dana's continuing operation," Dennis Gethmann, chairman of the college's Board of Regents, said in the statement.
The statement quoted Raj Kaji, president of Dana Education Corporation, as saying that the group was "deeply saddened" by the effect the decision would have on the college, its community, and "the hundreds of students who will be displaced."
The 125-year-old college, which is affiliated with the Evangelical Lutheran Church in America, has about 550 students. Dana said it has agreements with the University of Nebraska at Omaha and Grand View University, in Iowa, that will allow its students to continue their studies.
The accreditor's decision comes as Congress and the Department of Education have ratcheted up their scrutiny of the fast-growing for-profit higher-education sector and the agencies that accredit for-profit colleges. Two weeks ago, at a hearing of the House of Representatives education committee, lawmakers took the Higher Learning Commission to task for the standards it had used in granting approval to another for-profit institution, American InterContinental University.
That hearing came on the same day that the Education Department announced proposed new rules that would hold for-profit institutions, which account for 25 percent of all Pell Grant funds, more accountable in the ways they market themselves and for the education they provide.
Last week, the Senate education committee held a hearing in which lawmakers vowed to crack down on "bad actors" in the sector to protect federal student-aid dollars from fraud and abuse.
And on Wednesday, a key senator called for a ban on the practice of allowing companies to acquire accreditation through the purchase of nonprofit colleges. That was one of several concerns voiced by Sen. Richard J. Durbin, Democrat of Illinois, in a speech in Washington. He also called for limits on the amount of federal student aid that may be spent on marketing, a review of a rule that allows for-profit colleges to receive up to 90 percent of their revenue from federal student aid, and a closer look at private loans that for-profit colleges make to their students.