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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, May 13, 2017

Department Of Education Throws Student Loan Lifeline To Teetering Charlotte Law School

Charlotte Logo (2016)Politico, Devos Reinstates Some Funding to Troubled For-Profit Law School:

The Trump administration has indicated that it plans to greenlight the flow of some federal student loans to the embattled for-profit law school whose funding the Obama administration cut off last year. Education Department officials last week told the Charlotte School of Law that they're "prepared" to disburse loans to students for the current semester, according to an email to students from school president Chidi J. Ogene that was obtained by POLITICO. Only students who previously received a federal loan in the fall will be eligible for the late spring disbursement, which Ogene said he expects by this Thursday.

- The backstory: After the Obama administration terminated the law school's funding in December, school officials began negotiating with the Education Department to allow some current students to receive loans for the spring. Obama Education officials proposed allowing the limited funding on the condition the school wind down its operations and eventually close. But school officials rejected that deal on Jan. 19, suggesting in a statement that they were holding out hope for friendlier treatment from the Trump administration.

- The infusion of funding is likely to help Charlotte School of Law stay afloat even as the state's attorney general has raised concerns about its operation. Representatives of North Carolina Attorney General Josh Stein, a Democrat, wrote in a letter to Education Secretary Betsy DeVos last month that they're worried that the school-which is under state investigation-is trying to run out the clock on federal loan forgiveness for its students. If the school collapses, Charlotte School of Law and its corporate parent, InfiLaw, would likely be on the hook for millions of dollars in "closed school" loan discharges.

- Charlotte School of Law remains ineligible to offer new federal student loans. Ogene confirmed in the email to students that its application for reinstatement remains pending before DeVos. He wrote that he didn't expect the department to act on it before the end of the semester.

Prior TaxProf Blog coverage:

http://taxprof.typepad.com/taxprof_blog/2017/05/department-of-education-throws-student-loan-lifeline-to-teetering-charlotte-law-school.html

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Comments

This is sad news. That school needs to close now. It's taken advantage of enough ill-informed consumers of legal education.

Posted by: AnonLawProf | May 13, 2017 10:13:55 AM

What the U.S. Department of Education was unprecedented in the history of our nation. As the former general counsel to an accrediting agency, I became familiar with the interaction between the DOE and accrediting agencies. The two are supposed to work together. By taking away access to the federal student loan program, the DOE did something it has never done before--acting before the accrediting agency. Institutions are placed on probation every year, and never has the DOE taken away access to the federal student loan program based on probationary status. The real outrage in this story is that the DOE, under the Obama administration, overstepped its bounds. One lasting problem for accrediting agencies is what to do with schools that need to be placed on probation. The accrediting agencies may be less inclined to move to probation, knowing that the DOE might pull access to the federal student loan program. This uncertainty hurts the accrediting process.

Posted by: Beau Baez | May 14, 2017 5:00:56 AM

The ED has an independent obligation to police the financial and administrative capacity of Title-IV schools. I don't see how the ED has overstepped its boundaries.

Posted by: Matthew Bruckner | May 15, 2017 5:43:33 AM

ED did not overstep its boundaries in any way. It did exactly what it needed to do to protect potential CSL students and taxpayers from the greed of Infilaw. The school is in no way completely innocent in any of this. Please understand that probation would have never happened if CSL had simply done what it was told to do in informing students, and ED would have had no reason to pull funding. ED gave the school plenty of time to fix its problems.

Posted by: Mary Watson | May 16, 2017 7:53:21 PM

Beau Baez,

What do you expect ED to do when a regulating body absolutely refuses to do it's job and continues to accredit a school that has a bar passage rate under 30%? ED has a lot of skin in the game, and maybe, unlike, the ABA, even cares about doing the right thing.

Posted by: JM | May 17, 2017 7:32:32 AM