U.S. Department of Education Takes Action on Student Aid Violations and School Closure

U.S. Department of Education Takes Action on Student Aid Violations and School Closure

Institutions Owe More Than $6 Million to Taxpayers
August 10, 2021

Today, the U.S. Department of Education's office of Federal Student Aid (FSA) issued Final Program Review Determinations to two schools: RWM Fiber Optics, Inc. and Harrison College. In each instance, FSA identified more than $2.5 million in liabilities, resulting from multiple violations by RWM and from the closing of Harrison, respectively.

“All institutions are expected to serve the best interests of their students, not serve themselves,” said FSA Chief Operating Officer Richard Cordray. “Schools that engage in bad behavior or that suddenly close their doors, leaving students out in the cold, will be held accountable, and we expect other schools to pay attention to the actions we are taking today.”

RWM Fiber Optics, Inc. (RWM)

In September 2018, FSA conducted a routine program review at RWM to evaluate the school’s compliance with the federal statutes and regulations that govern the student aid programs. During the review, FSA examined RWM’s processes and identified 16 specific violations, including numerous instances where school officials falsified information or improperly retained credit balances that were actually owed to the students. FSA determined that these violations were “egregious” efforts to illegally obtain federal student aid funds.

In particular, FSA found that the school falsified FAFSA information to make it appear students were eligible to receive financial aid to which they were not entitled. RWM listed nonexistent dependents to inflate student aid awards, and it fictionalized high school diplomas or GED credentials that some students did not earn. RWM also improperly created student aid account usernames and passwords without students’ knowledge or consent, and the school submitted FAFSA information without allowing students to review or certify its accuracy.

Among other violations, FSA determined that RWM improperly paid students with Federal Work-Study Program funds to clean bathrooms, pick up garbage, and clean the building, even though these tasks did not help students develop in their professions as the program requires. Further, RWM failed to pay students credit balance refunds on a timely basis or in lump sums as required by law. Some students did not receive their credit balance funds until they graduated.

FSA found that RWM owes the Department more than $2.4 million in liabilities, which cover all Title IV program funds disbursed for the 2015–16, 2016–17, and 2017–18 award years. RWM’s participation in federal student aid programs ended in December 2018, and the school closed.

Harrison College (Harrison)

In September 2018, Harrison announced its immediate closure of 11 campuses in Indiana and Ohio affecting approximately 2,100 students. The institution cited declining enrollment and financial concerns as factors for its sudden closure. Harrison’s financial composite score deteriorated rapidly between its fiscal years ending June 30, 2017 and June 30, 2018.

Student loan borrowers enrolled at Harrison when it closed (or who withdrew within 120 days before it closed) and unable to complete their program of study because of the closure, may apply for a discharge of their federal student loans. Parents who borrowed a PLUS loan for a student enrolled at Harrison may also apply for a discharge.

When Harrison closed, FSA conducted outreach to help students understand their options. Today, FSA finds that Harrison is liable for more than $3.6 million that taxpayers paid to discharge William D. Ford Federal Direct Loan Program loans on behalf of borrowers who applied for and received closed school loan discharges. That amount is in addition to more than $2.9 million in closed school discharges that FSA previously assessed to Harrison following a final audit.

Today’s actions underscore the Department’s commitment to protecting students and taxpayers from poor-performing programs. Last week, the Department announced its intent to form a negotiated rulemaking committee to address issues affecting student loan borrowers, including borrower defense to repayment for students harmed by their colleges’ misleading practices, loan repayment, and improving the rules governing targeted student loan cancellation, including closed school discharge.