The US Department of Education has terminated beleaguered Argosy University’s participation in the federal Student Financial Aid Program effective February 27th.
This follows the disappearance of $13 million in federal financial aid meant for students enrolled at the university..
US DOE had warned that the school could be kicked out of federal student aid programs for failing to give student loan funds leftover after their tuition was covered, known as credit balance refunds.
Court documents attribute the missing money to the financial unraveling of Dream Center Education Holdings, a non profit group that acquired Argosy in 2016.
The Los Angeles company struggled to turn the for profit colleges into thriving non profit schools and spent months trying to close and sell campuses to meet financial obligations.
When it fell short, Dream Center in January entered into receivership.
In a letter sent Wednesday to Dream Center Chairman Randall Barton and the court appointed receiver Mark Dottore, the Education Department said it released financial aid funds to cover the credit balance refunds before the company entered receivership.
Weeks later, Dottore sent the agency a cash flow statement showing that Argosy used $4.4 million of the money to pay staff, $2.1 million to pay vendors and $1.7 million for other operational expenses.
Michael Frola, a senior official at USDOE wrote, “Significant funds were released by the department since mid January, including after the receiver was appointed which should have been used to pay the existing unpaid credit balances owed to students.”
He added, “Argosy’s actions in failing to pay credit balances is a severe breach of the required fiduciary standard of conduct to disburse the students’ funds to them and demonstrated a blatant disregard of the needs of its students.”
Frola documents chaotic events at Argosy locations that he said underscore the university’s financial irresponsibility.
An Argosy campus in Phoenix ceased operation after being locked out of the premises.
Meanwhile Dottore fired Argosy’s Chancellor and nearly 100 faculty, academic support personnel and financial aid counselors, according to the letter.
In some cases, professors were pulled out of class in the middle of teaching.
The USDOE said these actions have resulted in substantial and irreparaple damage to the academic integrity of Argosy and accordingly violate the requirements of financial responsibility.
In addition to the termination of financial aid for Argosy, USDOE rejected an application to change Argosy status from for proft to non profit status.
Argosy has until March 11 to dispute USDOE’s findings.
