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Two For-Profits Accused of Scamming Students, Won't Get Funding

Two For-Profits Accused of Scamming Students, Won't Get Funding
2/2/2016
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Susan Dutca-Lovell

Two for-profit trade schools are being accused of lying to students in order to secure millions in federal funding. After receiving a combined $107 million in federal funding in the 2014-2015 academic year, two for-profit trade schools are temporarily banned from receiving any more funding from the Department of Education after reportedly falsifying documents and student statistics in what is being called an "outright lie to both students and the federal government."

Marinello Schools of Beauty has 56 campuses in California and Nevada, 23 of which will no longer receive federal aid after reportedly requesting aid for students who had "invalid high school diplomas" and making students pay higher monthly out-of-pocket costs to cover tuition - such as $2,500 to $2,750 for books and supplies- even when they qualified for more aid, according to Jillian Berman. Marinello is a for-profit institution that received more than $87 million in Pell grants and federal loans in the 2014-2015 academic year. The chain was already on a "heightened cash monitoring” list, which is usually due to issues involving debt, accreditation or turning in financial information late. Marinello spokesman Joe Hixson plans to appeal the decision since the Department only now "disclosed to us its unfounded allegations." He maintains the intuition's innocence and warns that "[Marinello] will defend itself vigorously, without the federal funds our students deserve, our operations are at risk." This cut would affect 4,3000 students and potentially remove 800 employees from their jobs, according to Hixson.

On the other hand, Under Secretary Ted Mitchell claims that such "questionable business practices" simply "violate [the school's] trust through deceptive marketing practices and defraud taxpayers by giving out student aid inappropriately." Similarly, Computer Systems Institute (CSI) has been accused of "submitting false job placement rates" to students by the Department of Education and the Accrediting Council for Independent College and Schools. CSI had stated 42 of its students who graduated were working for a company called Home Health Consultants - the Department's investigative follow-up found no students worked for HHC or in a related healthcare field. CSI received roughly $20 million in federal funding in the 2014-2015 academic year. For-profit schools have been criticized for enrolling students through "troubling tactics" in order to profit from federal funds, leaving students ill-prepared for the jobs they were promised. While for-profit schools are known for admitting nontraditional students, many students end up borrowing large sums of money that cannot be repaid - but the school gets paid regardless.

Corinthian Colleges, known to be one of the largest for-profit schools in the US, went bankrupt after allegations of falsifying "job placement and graduation rates to lure students," according to Berman. Although the schools have two weeks to dispute the claims, Berman notes the Department of Education must “determine what qualifies as a successful borrower defense claim."

Credit attributed to Jillian Berman who covers student debt and financial issues faced by today's youth, with pieces featured in MarketWatch, The Huffington Post, Bloomberg, and Xconomy.

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Comments (6)
Political Scince,hostory,eng,mil 2/4/2016
I Am Middle Class Boy
Ethan S. 2/3/2016
There are many scholarships to apply for, don't get caught up in debt and sketchy like businesses. Always do your research and make sure you are 100% sure before you invest.
Michelle H. 2/3/2016
I just completed my eight month curriculum at CSI downtown Chicago campus. I graduated and was certified in my disciplines during the process. However, what I learned through job search efforts the widely held certifications that employers are paying top dollar for are not offered at CSI. This is disappointing. $15,000 is not pocket change for me and the best I have been able to do is secure a part-time job at minimum wage (10.00) and learn quick about the real world of billing and coding so that I can move on to better opportunity. Also, during my initial interview I kept repeating how I was unemployed going through major life changes and I did not know how I would pay back the loan from the school. In return I have not gotten my diploma for completing the coursework.
eve b 2/2/2016
contact department of education to get this school loan erase that whst i did . goodluck??
james buchanan 2/2/2016
This is an effective tool to have scholarships for colleges
Jessica v 2/2/2016
I am currently a student at one of these marinello schools and this is the most scariest frustrating things to go through any advice as to where to go from here is greatly appreciated
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