CINCINNATI — The U.S. Department of Education has imposed new financial restrictions on Union Institute & University, requiring it to “pay all federal student aid credit balances” before the department will disburse new federal student aid to the school.
Union President Karen Schuster Webb obliquely referred to the new restrictions Thursday in an email that informed employees the school will delay their second straight paycheck Aug. 25.
“Just recently Union was informed that the university will not be able to draw down government funds, which include tuition, until after the Fall Semester starts,” Webb wrote. “This is devastating news for all of us, but that said, Union remains open and fully accredited. We are exploring all options, including pathways for partnerships that would provide sustainability.”
In an Aug. 18 email to the WCPO 9 I-Team, the federal agency said it placed Union Institute on the “Heightened Cash Monitoring 2” payment method Aug. 9. The designation followed student complaints that Union Institute used their student loan refunds to cover payroll expenses.
‘Heightened cash monitoring means the Department of Education basically said we’re not sure everything is entirely above board with the college,” said Preston Cooper, senior fellow in higher education policy for the Foundation for Research on Equal Opportunity, a nonprofit think tank based in Austin, Tex. “It could be a sign that it’s in financial trouble or there could be something else that the department is investigating.”
Cooper said 40 U.S. colleges are currently facing the HCM2 designation, which often precedes a school’s closure or merger with another institution.
“If you’re a student there, it’s probably appropriate to start looking for options to transfer your credits to complete your education somewhere else,” Cooper said. “If I’m an employee, I would probably start polishing up my resume.”
The I-Team has been tracking financial woes for months at Union Institute, a 59-year-old private, nonprofit university that touts itself as a pioneer in distance learning.
In March, the school started missing paychecks, resulting in a proposed class-action lawsuit in April — alleging Union Institute violated Ohio law and the federal Fair Labor Standards Act.
Financial problems continued in July with more missed paychecks and allegations that the school used student refunds to cover payroll expenses. As the turmoil continued, school officials repeatedly declined to comment and agencies overseeing Union Institute took little to no action.
Last week, the Ohio Department of Higher Education said it was “in communication with both Union administration and the Higher Learning Commission, the accreditor of the university. ODHE will continue monitoring the situation with a goal of ensuring that Union’s students are receiving a positive, high-quality academic experience that prepares them to meet Ohio’s expanding workforce needs.”
Its website indicates the Higher Learning Commission has scheduled a “focused visit” to examine the school’s finances, but it won’t take place until October 23.
There “may be nothing left of the university by then,” wrote Kathryn Giancola, an assistant registrar at Union, in a complaint to the Higher Learning Commission Thursday. She shared a copy of the complaint with the I-Team.
“The situation at UI&U is dire and requires immediate attention,” she wrote. “How can Union's accrediting body stand by and allow this to happen?”
The complaint lists a series of problems caused by Union’s lack of cash, including an Aug. 22 lawsuit in which its Florence Ave. landlord, an affiliate of Covington-based Corporex, said the school is $450,000 behind on its rent.
“Union is locked out of its Cincinnati headquarters,” Giancola wrote. “The Registrar's Office does not have access to student records that are housed in the headquarters. Diplomas cannot be mailed to students because there is no money for postage available on credit cards and because we have no access to the postage meter in the HQ building. Other student services have been suspended because of Union's inability to pay vendors. Students are panicking. Long-time employees (working under extreme stress and expected to assume the duties of multiple positions) are hanging on in hopes that the calvary will arrive but no one is coming.”
The U.S. Department of Education said its new cash restrictions are intended to help students.
“HCM2 provides protection for students because a school must first disburse federal student aid from its own institutional funds and pay all federal student aid credit balances before the Department will approve a deposit of federal student aid funds into the school’s account,” a spokesman wrote. “The school’s payment request must include detailed records for any students selected by the Department for an in-depth file review prior to the release of any funds. The school’s president and its financial officer must also certify that all required refunds and all credit balances have been paid.”
Cooper said the department can also use heightened cash monitoring to look for evidence of financial improprieties. And that’s one reason he thinks Union students should file a “borrower defense” claim over the school’s use of student loan proceeds.
“It does seem like there’s some smoke there that’s worth investigating,” said Cooper, the Texas-based policy expert on higher education. “You need to show that the institution made a substantial misrepresentation (either) intentionally or with reckless disregard for the truth. You also need to show that the student reasonably relied on this misrepresentation and suffered financial harm because of it.”
If the Federal Student Aid office determines “there really was fraud going on … the student who submitted this claim will get their federal loans discharged. The Department of Education will then try to recover those discharged amounts from the institution itself, assuming the institution is still open.”
It takes about three hours to file a borrower defense claim, according to the Federal Student Aid website.
