For-Profit Closures Leaving Students Stuck with Loans

A group of senators is urging the federal government to forgive massive amounts of student loan debt from students in New Jersey who were saddled with only their debt when Star Career Academy, a for-profit career school closed suddenly.

The academy operated several campuses across New Jersey as well as New York and Pennsylvania when it closed.

According to school officials, the closure came as a result of a steadily declining student population combined with challenges associated with operating a for-profit school.

Several senators recently called upon the U.S. Department of Education to forgive the loans of students who were left holding debt with no degrees following the closure of the school. The students may be eligible to have all of their federal loans discharged if the school they attended closed while they were still in attendance or within 120 days of their withdrawal from the school, according to rules issues by the Department of Education.

non profit school closing

Not all students are eligible to have their loans discharged, however. Students who completed their coursework, regardless of whether they received a diploma, those who withdrew more than 120 days before the closure of the school, those who go on to complete a similar program at another school, and those who took out private student loans are not eligible to have their loans discharged.

State senators are now urging the Department of Education to extend the period of loan forgiveness as well as consider students who withdrew since October 2015 to be eligible for loan discharge. Students should not be held responsible for the mistakes of the school, according to lawmakers.

How Star Academy’s Closure Went Down

A court ordered the school to pay more than $9 million to both current and former students last year. According to the court, the school’s surgical technology program was guilty of misrepresenting facts regarding accreditation. Furthermore, the court found that the school’s commercial practices were in violation of the state’s Consumer Fraud Act.

Star Academy’s campus in Brick, New Jersey closed without warning in November, leaving hundreds of students without diplomas and large amounts of debt. The closure was announced on the school’s website and in emails and text messages to students, many of whom were left stunned by the news. The school, which had been in operation for 37 years, was appealing to adult learners who re-arranged their lives in order to attend the school’s programs in an effort to provide better lives for their families. Star Academy’s Brick campus opened six years ago providing health and medical training programs that could be completed in as little as eight months, paving the way for graduates to find entry-level positions.

Yet, not all was rosy with the school’s educational programs. The Accrediting Commission of Career Schools and Colleges had placed four of the school’s campuses on warning earlier in the year, including the Brick campus. Among the goals of the Commission is to ensure that schools provide well-developed programs that will prepare students for their selected career fields.

Closure Places Students in Difficult Circumstances

Following the closure of the Brick campus, students seemed confused about recourses available to them. Hundreds of students posted to the school’s social media page inquiring about their outstanding loans and how they should go about obtaining transcripts and certificates for their schoolwork.

While students who have not graduated will be eligible to have their federal student loans discharged if they do not continue their education at another school, even that solution leaves students in dire circumstances. For many of these students, attending a short-term program was a desperate attempt to improve their career choices and earnings potential. Now, having wasted months attending a program, these students have been forced out into the cold, with no certificate of completion that would enable them to find a better job and are being told that the only way they can have their debts discharged is if they do not pursue the opportunity to complete their education at another school.

Star Academy Not Alone in For-Profit School Closings

Star Academy is not the only such for-profit school to have shuttered its doors recently. Several other for-profit schools in the state have also shut down over the past several years, including Anthem Education which operated campuses in Jersey City, Cherry Hill, Parsippay, and North Brunswick, closed in 2014. ITT Technical Institute was banned by the U.S. Department of Education from enrolling new students who use federal student aid funds. The previous year, the Corinthian College chain closed down as well.