CINCINNATI — The U.S. Department of Education has sent an “emergency action” letter to Union Institute & University that would terminate its participation in federal student aid programs and impose a $4.3 million fine for “serious, ongoing violations” of student loan funding regulations.
The Nov. 7 letter gave the Walnut Hills school until Nov. 27 to appeal the action. It also provided a detailed account of alleged rules violations that include:
- Failing to pay 157 students a combined $753,374 in student loan refunds, some of which were due in May.
- Failing to pay 81 employees in the July 28 pay period, then failing to process any payroll since Aug. 11.
- Drawing down $43,524 more in student loan disbursements than it was entitled to receive in five transactions between June 27 and July 12.
- Allowing $200,000 in federal student loan funds to be swept from a bank account by a lienholder “to pay the balances owed on (Union’s) delinquent credit cards.”
Union “has misused Title IV funds to the detriment of its students, the department and taxpayers,” said the 14-page letter. Its “repeated failure to act as a fiduciary in administering federal funds creates serious risks that the funds will continue to be misused in the future.”
Union Institute President Karen Schuster Webb did not respond to questions about this story.
Although the federal action could be the death knell for the private, nonprofit university founded in 1964, there is no mention of it on Union’s web site. It still urges prospective students to “start achieving your goals” with PhD and Masters sessions beginning Jan. 1.
And that’s prompted students and faculty to call for more aggressive enforcement actions.
“We are literally begging for the Department of Education’s criminal investigations side or somebody else to come in and look at this,” said Corina Smith, a California-based, full-time faculty member in Union’s criminal justice management program. “If it’s all on the up and up, then fine. But if this was something else, then somebody needs to answer for it.”
The WCPO 9 I-Team has been tracking financial woes at Union since March, when it failed to pay employees in two straight payrolls, resulting in a class-action lawsuit in April. Payroll problems continued into July, when students told the I-Team the school used their student loan refunds to pay employees instead. The Department of Education imposed cash restrictions on Union in August – followed by a September demand that the school establish a $12 million line of credit before it can receive new federal student aid.
The Nov. 7 letter said Union has not complied with that demand, nor has it repaid nearly 90% of the $43,524 in student loan disbursements it allegedly claimed without substantiation. On Sept. 5, according to the letter, Union told the department the majority of its accounts had a zero balance.
That is a startling admission when you consider that Union had $6 million in cash and a $3 million endowment in 2018, when Webb took over as president, according to the I-Team's analysis of Union's financial statements.
Smith, a former Lieutenant in the Los Angeles Police Department, is part of a group of Union employees who’ve been looking for evidence of financial improprieties by requesting public records and poring over Union’s tax returns and financial statements.
She was particularly outraged by a section of the Nov. 7 letter. It summarized an Aug. 28 email in which school officials explained why they were unable to repay students the loan refunds they were owed.
“You went on to explain that (Union) couldn’t access the account … because a third party placed a lien on the account and the bank subsequently swept the account and used those funds to pay the balances owed on (Union’s) delinquent credit cards. If this is true, it is an egregious failure,” the letter stated.
Smith's assessment: “Just the mere fact that that you can allow outsiders access to the bank accounts to come in and sweep student funds to me that seems like pure theft."
The I-Team asked the education department if criminal referrals were made by its enforcement staff. An agency spokesman has yet to respond.
In the meantime, Union students are struggling to advance their academic pursuits because they can’t get access to their transcripts.
“I am frustrated, not getting answers,” said Bryon Garner, a San Diego-based student who told the I-Team in October that he needs records to pursue a post-doctoral fellowship. “We have been repeatedly assured that we would receive our transcripts and degree certificates but nothing has happened now in nearly a month.”
In Decatur, Ga., Alicia Simpson has completed everything but her doctoral dissertation. She worries she won’t be able to complete her degree because Union has yet to send her transcripts.
"I’ve had two programs who said, ‘Yes. We will take you. You can finish your doctoral program here,'" Simpson said. "I just need my transcripts. But they won’t give it."
Simpson worked as a clinical coordinator for Union while pursuing her doctorate. She was in dire straits when the school stopped paying employees in August.
"My blood pressure was literally like stroke level," Simpson said. "How do I pay for school? How do we pay for food? How are we getting gas?"
Like Smith, Simpson thinks a criminal investigation is warranted.
"I will be issuing complaints with whoever I can," Simpson said. "Where did the money go?"
The education department has a program to forgive student loans and help students transfer to other colleges – but that help comes after schools close. Union has yet to announce closure plans.
In fact, Smith said Union Vice President Tom Frederick sent an email this month saying Union would offer teachout plans in five programs but restart PhD classes in January.
Frederick did not return the I-Team’s email seeking information on the school’s plans.
“You have students that are in such dire straits,” Smith said. “They’re being required to pay back loans they never got, which is tragic. And no one’s helping them.”
