Facing Financial Problems, La. For-Profit College Shuts Its Doors

August 03, 2010

Students "come first," according to the motto of Ascension College, a for-profit institution in Gonzales, La. But the 137 students at the college, under investigation by local law-enforcement authorities and the U.S. Department of Education on allegations of misusing federal student aid, were among the last to find out that the campus was shutting its doors on Saturday due to financial problems.

The Education Department sent a letter to the college on Friday, saying the department had barred the college from receiving or distributing federal financial aid to students, essentially shutting off the institution's primary source of income. In that notice, the department charged that the college misused federal dollars: "The information obtained evidences severe breaches of Ascension's fiduciary duty to the department and serious violations of Title IV regulations."

The college's former financial-aid officer has been arrested on charges of felony theft of more than $7,600 in tuition payments made by students, according to The Advocate, a newspaper in Baton Rouge. Ricky Babin, a local prosecutor, told the newspaper that his office and the Gonzales police were continuing an investigation of student complaints about the college, but that no charges had been filed against its owners.

The college's closure is likely to add fuel to the fire for critics of the for-profit sector and raise questions about the effectiveness of accreditors, who had given the college a stamp of approval, enabling students to receive federal aid to attend Ascension. The college had been accredited by the Accrediting Council for Independent Colleges and Schools, a national accreditor that has approved more than 680 career and technical colleges in the United States and in more than a dozen foreign countries.

Both the Department of Education and Congress have increased their scrutiny of for-profit colleges over the past year. The department has recently issued a set of proposed rules that would significantly tighten regulation of for-profit colleges, and Congress this week is holding its second in a series of hearings focused on problems in the sector.

Accreditors, too, have come under fire from some members of Congress who have charged the organizations with setting low standards and providing lax oversight of for-profit institutions.

In the case of Ascension, the Accrediting Council for Independent Colleges and Schools had annually reviewed the college's audited financial statements since it was first accredited in 2005 but had not found any significant problems, said Anthony S. Bieda, director of external affairs for the council.

In addition to conducting an annual review of the college's financial statements, a team of reviewers from the council had been on the campus within the past 18 months, Mr. Bieda said. Federal investigators may have had access to more information than is provided to the council, he said.

But by not disclosing its fiscal problems, Ascension violated the terms of its accreditation, he said.

"Under our criteria, it's explicit that ... if the institution is under any financial difficulty, they must give us ample warning to come up with a protection plan for students," he said. "In this case that didn't happen, and that's a huge concern for us."

Fred Kerr, an administrator at Ascension and a member of the family that owned the college, said Ascension and two other colleges owned by the family "had very few complaints over the years and had solid completion and placement outcomes, which proves we were concerned and focused on students."

Signs of Trouble Missed

In the coming months, the council will consider what warning signs it may have missed that would have pointed to signs of trouble, Mr. Bieda said.

And the college's administration must submit a "teach-out" plan to the accreditor that details how the college will help students finish their programs at other institutions.

Ascension offered five certificates for programs that trained medical and dental assistants, licensed practical nurses, and office administrators. If Ascension does not submit a plan in a timely fashion, the owners may be barred for life from accrediting any other colleges through the council, Mr. Bieda said.

Louisiana's Board of Regents is also assisting Ascension's students and has found a dozen other proprietary colleges that are willing to accept the students without charging them any more for the instruction than they have already paid Ascension for, said Meg Casper, associate commissioner of public affairs for the board.

Even if the signs of trouble at Ascension were not immediately evident to accreditors, the track record of the Kerr family, which had owned Ascension since 1999, included two other failed institutions, both of which had been accredited by the council and were closed by their owners because of financial problems, though not forcibly closed by the education department.

Through corporations in Louisiana and Georgia, the Kerrs opened the Gadsden Business College in Rainbow City, Ala., and a branch campus in Anniston, Ala., both of which closed in 2008. The family also owned the Savannah River College in Augusta, Ga., which closed in 2009.

The Kerr family does not own any other colleges, according to an e-mail from Mr. Kerr. "Our issues with financial aid are because the schools needed improved infrastructure," he wrote. "Our focus was working with the students. However, we should have spent more time improving our internal systems, such as using a third-party servicer in order to comply and keep up with the changes in federal student aid."

In a letter to students, Mr. Kerr apologized to them and thanked faculty members. "The Kerrs care tremendously about the students, and this is heartbreaking for us," he wrote.