For Heritage College’s Abandoned Students, Next Steps May Be Hard, But Situation Not Hopeless

by Leif Swedlow

Earlier this week, the day after Halloween, Heritage College, operated by Weston Educational, Inc., with ten campuses including one in Oklahoma City, abruptly closed. The shuttering of these schools leaves hundreds of students here and in other cities apparently abandoned.

Heritage College is not the first and likely will not be the last for-profit college to close with little or no notice to current students. The previously much-advertised ITT Tech succumbed in September, 2016. Other for-profit colleges that have shut down in recent months include 15 campuses of the Art Institute, operated by Education Management Corporation, and a growing list of others.

The Washington Post recently published an article exploring the regulatory pressure that has broken the financial model relied upon by ITT Tech, Heritage and other for-profit “career schools.” Pursuing truth-in-advertising and other consumer-protection mandates, the Federal Trade Commission, among other agencies, has evolved from merely fining for-profit colleges for what it views as predatory business practices, and has expanded its enforcement measures to cutting off the ability of these schools to have students apply for and use guaranteed student loans to pay tuition. If a for-profit college is found to be unable or unwilling to comply with tightened regulations upon their business practices, their chief source of revenue is placed in jeopardy.

Link: Is the federal government trying to take down the for-profit college industry?

This regulatory attention may be due to one of the persistent weak points of the for profit “career school” industry: their graduates tend to default on student loans at a markedly higher rate than graduates of more traditional state and non-profit universities. When those loans are backed by federal student loan guaranty programs, the for-profit college gets paid in full, and repayment of the students’ incurred debt eventually becomes the government’s problem.

Students of the suddenly-shuttered Heritage College have already started calling law firms (including this one) looking for answers to a host of questions. Many of them have incurred debt well beyond their current means and spent significant amounts of their own money, expecting to complete a degree that will help them get a job. Without the degree, and the resulting job, the prospect of repaying the debt is slim.

The first thing some of the abandoned students may be thinking is that perhaps they can sue someone. For that approach, the outlook is bad news. As a lawyer who predominantly handles commercial litigation and appeals, sometimes involving bankruptcies (where ITT Tech is and Heritage is likely to be), I observe that in some cases a person’s legal claim may be sound, just and proper, but as a practical matter, going to court is unlikely to actually bring about meaningful relief. Filing a lawsuit against the company who ran Heritage College, or its owners, or presenting a claim for a refund of tuition in the bankruptcy case that will follow, is not likely to provide any immediate help -- especially for students who were merely months, or even weeks, from completing their programs and receiving their degrees. Litigation tends to be a long road.

But there is some potential good news. Students who have borrowed money to fund their programs at a closed for-profit college may qualify to have their incurred loan debt forgiven, cancelled or deemed discharged. This possibility applies to all three main types of guaranteed student loans: direct, “Family” (FFEL) and Perkins. The Department of Education has a webpage already devoted to describing the criteria for getting a student loan cancelled, and the process that each affected student should follow.

Link: If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan.

However, going to another college to finish the degree plan will disqualify the debtor student from being eligible for a loan discharge. As a practical matter, any transfer of credit for completed classes will likely be only partial, requiring the student to take more classes, attend school longer, and spend more on tuition, fees and books than they would have if they have been able to complete a degree program in one school. This presents a tough choice that each student will have to make based on their individual priorities. Some may find it better (less unpleasant) to put the idea of finishing their degree on hold until after their application for a student debt discharge has been approved and their previous loans released, and then literally “start over” elsewhere. Others may find it less disruptive to apply at another college (hopefully, a more stable one), seek as many transfer credits as possible, and carry on, knowing that the tuition debt they incurred to pay Heritage College will follow them even though the college broke its promise to provide them with a complete college education.


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