How Our Government Failed Thousands of Students from Virginia College and Brightwood College

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Requiring Private School Surety Bonds Could Have Saved Students from Losing Millions in Tuition Fees

In early December, Education Corporation of America (ECA) abruptly announced its decision to close 75 campus locations throughout the nation, including those of Virginia College and Brightwood College. The closure came as a shock to the estimated 20,000 students currently enrolled in a degree or certification program, some of whom were told the news during one of their classes. Virginia College and Brightwood College did not provide a gradual shutdown, as regulators had suggested, but instead closed their doors without as much as a goodbye to students or teachers.

Despite the upset, the poor planning on the part of the schools is not all that uncommon, however, given the current state of the for-profit, private college market.



Why is Virginia College and Brightwood College Closing?

Although many students enrolled at Virginia College and Brightwood College campuses around the country were unsettled by the news of the closure, the decision was not surprising to those on the outside. Amid struggles to keep up enrollment numbers, both Virginia College and Brightwood College marketing teams found it challenging to maintain a steady stream of incoming new students. Part of the issue with enrollment connects back to the strong job market. When students feel they have ample options for employment, they are unlikely to take on the stress of earning a certificate or degree. However, some argue to more pressing issues with maintaining enrollment numbers is cost.

Year over year, the net price of college tuition has increased for nearly a decade. The combination of tuition and fees of private non-profit four-year institutions has risen to an average of just under $35,000 per year. For-profit institutions, which are under increased scrutiny in the last few years, range significantly in price, but the cost has also crept up. This high cost of earning a degree means students have to justify the expense with the potential for a career placement after leaving school. If that potential is weak, like it has been for Virginia and Brightwood College students in years past, enrollment naturally dwindles.

In addition to the rising cost of attending school, for-profit institutions and the organizations that create them, such as ECA, have continually faced difficulties in maintaining their accredited status. Virginia College and Brightwood College lost their accreditation from the Accrediting Council for Independent Colleges and Schools under the Obama Administration. They were later rejected by the Accrediting Council for Continuing Education and Training, citing weaknesses on both the campus and corporate office levels. Without appropriate accreditation, for-profit institutions cannot access federal student loan funds or grants, making students turn to other sources of financing, including private student loans. This outcome can result in a higher cost of education for students, and without a plan for gainful employment after the fact, for-profit colleges suffer immensely.

The Issue with Lost Credits and Tuition

The closure of ECA campuses has left students in a bind – one that will likely cost them more in both time and money. On Brightwood’s website, after the closure announcement, students were assured they would have easy access to their transcripts, so they could pursue the completion of their degree at another institution. However, some students who have already reached out to other colleges and universities have been told their credits won’t transfer, or they will be required to take coursework all over again. It’s almost as if Brightwood and Virginia Colleges didn’t exist at all.

Given the abrupt nature of the campuses closing doors, many students were left stranded within a few months of finishing their program. However, they won’t be able to complete their educational endeavors in the same timeframe because credits aren’t worth much. For those who financed their degree programs, they are likely to have to get additional loans, either from federal or private sources, to finish what they started. For some students, this may not be a feasible option.

A Government Oversight

The plight of Brightwood College and Virginia College may have been anticipated from the regulators tasked with overseeing for-profit institutions, but little was done to help students preemptively. What may have laid a stronger foundation for ECA students is stronger requirements on two different sides of the line: private school surety bonds and a guarantee of student loan funding.

Requiring a private school surety bond, which is a requirement in about half of states in the US, would have saved students hundreds to thousands of dollars in this situation. A private school surety bond guarantees that pre-paid tuition will be paid back to students in the event a school shuts its doors. Also, a surety bond in this instance guarantees that a school holding a bond plans to honor contractual obligations to its students, staff, and other parties. Students have no access to file a claim against ECA campuses because no private school surety bond was in place. Regulators could have required this of the schools, but they failed to do so.

In addition to a surety bond solution, states allowing for-profit institutions to operate could have implemented different, more stringent standards for student loan guarantees. The federal government often acts as a guarantor for Department of Education loans, meaning if a student defaults on payment, the government steps in to cover what’s owed. In the case of a school closing, giving students the option to lean on this provision would have been beneficial.

Finally, state or federal governments, although moving in this direction, should press harder for accreditation standards for for-profit colleges. Virginia College and Brightwood College might not have faced the same end result if strong accreditation was in place, backed by solid degree programs and curriculum that lead to potential career placement for graduates. Students across closed ECA institutions experienced a declining placement rate after earning their degree or certificate, leading to more accreditation issues for the schools.

A Government Oversight

For Virginia and Brightwood College students, the inability to transfer credits to another institution combined with the increased cost of their education because of the lost credits is a hard obstacle to overcome. Many may opt to forego their dreams of finishing a degree program, or they may be saddled with additional debt to do so. For those who do not pursue further education, federal student loans may be forgiven because of the school closure; however, the private student loans taken to cover the gap remain intact. Students who do ultimately transfer to another college or university are still required to repay their loans, both federal and private, even after ECA closures.

Avoiding this issue would have been as simple as putting safeguards in place to protect students putting their trust in the for-profit education system. Private school surety bonds combined with guaranteed student loans and more stringent accreditation practices may have saved Virginia and Brightwood College students from their new, painful reality.

Eric is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog. He has held a range of different roles within the surety industry, from agent assistant to bond issuer, which gives him a unique insider perspective on surety related topics.

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