CINCINNATI — The U.S. Department of Education has imposed a new sanction on Union Institute & University, requiring it to secure a $12 million letter of credit or place the same amount of cash in escrow by Oct. 13 — or lose access to federal student aid.
The demand followed a “financial responsibility” analysis by the department that concluded the school has yet to pay $750,000 in student loan refunds owed since July and it “lost access” to its headquarters building and to critical student data before delaying the start of its fall term
Union “has not paid salaries in three pay periods and few staff remain,” wrote Christopher Miller, chief of the Atlanta School Participation and Financial Analysis Division, in a Sept. 21 letter to Union President Karen Schuster Webb. “It is unclear if (Union) has the financial resources to resume educational instruction with minimal staff and resources.”
The I-Team tried to reach Webb through an attorney for the school. She did not respond. However, an expert on higher education finance said ITT Technical Institutes closed within days of getting a similar letter in 2016.
“It’s not over ‘til it’s over but similar colleges that have been in this situation before have almost always closed down,” said Preston Cooper, senior fellow senior fellow in higher education policy for the Foundation for Research on Equal Opportunity, a nonprofit think tank based in Austin, Tex.
Cooper advised Union students to seek a “closed school discharge” from the U.S. Department of Education.
“If your college closes and you’re unable to transfer your credits and complete your degree or certificate at another institution, then the federal government will discharge your loans,” Cooper said. “You have to submit an application for this to happen. They’re trying to make it automatic but that’s run into some roadblocks.”
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.
But the U.S. Department of Education placed Union under heightened cash monitoring in August and followed with the financial responsibility sanction in September.
Also in September, Ohio’s Department of Commerce opened a new investigation into two complaints that employees weren’t being paid. Three previous complaints led to no action by the Division of Industrial Compliance. But the new complaints triggered a more robust response.
“We have requested wage records for all employees and are in the process of waiting for a records response from the Union Institute,” wrote Commerce Department spokesman Jarrod Clay, in an email response to the I-Team.
The new enforcement efforts bring little relief to Romel Cuellar, a sergeant in the Tuolumne County sheriff’s department near Yosemite Park in California.
Cuellar is six classes away from a bachelor’s degree in emergency services management at Union. He was hoping to graduate by February, enabling his promotion to lieutenant. But he’s now convinced that won’t happen and he’s had trouble getting Union transcripts that schools will accept.
“I can’t promote until I have my degree,” Cuellar said. “Most of the colleges that I’ve looked at and talked to … they only accept a limited amount of credit. The majority that I’ve found right now will only accept 80 of my college credits out of the 180 I need to graduate. So, that puts me at two more years of college.”
Cuellar is motivated to complete his degree because California is lifting law enforcement standards to encourage more college degrees and his son is recovering from cancer.
“He’s in remission now,” Cuellar said. “We have five more years left to go. He was diagnosed at 3 years old. He just turned 7.”
Cuellar thinks government agencies and accrediting bodies should have intervened sooner to protect students and faculty at Union. And he’s very disappointed that Union didn’t let students know about its looming financial crisis.
Union’s website makes no mention of the school’s financial woes and continues to request new applications for a fall term beginning Nov. 6.
“Just in my profession alone, we always preach, “Hey, just fall on the sword if you make a mistake and own it.’ If they made a mistake, it’s a big mistake, but at least own it, right? And do the right things by us,” said Cuellar.
