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# Department of Education’s Federal Student Aid Denies Reinstatement Application of For-Profit Law School

# Department of Education’s Federal Student Aid Denies Reinstatement Application of For-Profit Law School

May 13, 2021

**Contact:  **press@ed.gov

                                    -        
Today, the office of Federal Student Aid (FSA) in the  U.S. Department of Education (ED) informed Florida Coastal School of Law that  its application for reinstatement to participate in federal student aid  programs has been denied. The action delivers on President Biden’s commitment to stop for-profit education programs from profiteering off students and comes  as U.S. Secretary of Education Miguel Cardona and new FSA chief Richard Cordray  are stressing that for-profit schools will be held accountable for meeting the  standards for participation in the Department’s *Title IV* programs.

"Too often, we see for-profit schools that try to take advantage of students, misuse taxpayer dollars, and skirt the rules to participate in federal student aid programs,” Secretary Cardona said. “Today we want to be heard and understood by for-profit schools around the country: we will be vigilant in ensuring they meet their commitments to students, families, and taxpayers.”

The reinstatement application for Florida Coastal School  of Law was denied for three reasons:
- Failure of the financial responsibility standards:
- Failure to meet the fiduciary standard of conduct; and
- Failure to meet the standards of participation, including the standards of administrative capability.

“Florida Coastal School of Law operated recklessly  and irresponsibly, putting its students at financial risk rather than providing  the opportunities they were seeking,” said Cordray. “Our commitment is to  stand up for all students and ensure their institutions are held to the  standards our students and communities expect and deserve.”

Today’s notification comes after the school’s contract with the Department expired on March 31, 2021, when required Florida Coastal  School of Law officials refused to sign the contract, effectively ending the school’s participation in the federal student aid programs. In early April, Florida Coastal School of Law applied for reinstatement.

Below are additional details regarding the denial of Florida Coastal School of Law’s reinstatement application:

**Failure  of the financial responsibility standards**

The federal Higher Education Act requires institutions to  meet general standards of financial responsibility to participate in the  federal student financial aid programs. Florida Coastal School of Law failed to  meet these standards because its financial composite score for the past two  fiscal years was -1.0, the lowest possible score. The institution carried  significant debt due to a declining student population and issues surrounding  the closure of two other schools that were also under the same ownership: Charlotte School of Law in Charlotte, North Carolina and Arizona Summit Law  School in Phoenix, Arizona.

Additionally, the audited financial statements for  Florida Coastal School of Law contain a disclosure that raises substantial  doubt about its ability to continue operations. Last month, the private equity  firm that had owned 98.6% of the institution relinquished its ownership. This  move demonstrated its unwillingness to assume any potential liabilities related  to noncompliance rather than using its resources to support the school’s  continued participation in the federal student financial aid programs.

The institution’s accreditor also found that Florida  Coastal School of Law was violating other standards, such as failing to provide  critical services that it advertises and failing to meet its obligations to  correctly determine student eligibility for the federal student financial aid  programs. FSA therefore determined that the institution failed the financial  responsibility standards set by federal law.

**Failure  to meet the fiduciary standard of conduct**

Institutions—and the owners of the institutions—that  participate in the federal student financial aid programs must adhere to a  fiduciary standard of conduct and must act with the competency and integrity  required as a fiduciary. In ongoing discussions for over two years, officials  at Florida Coastal School of Law did not meet these standards by failing to  notify FSA about accreditation issues and other significant developments  related to the institution’s ownership structure.

**Failure to meet the standards of participation**

To participate in the federal student financial aid  programs, institutions must adhere to all applicable statutory and regulatory  provisions and must competently administer the programs with adequate internal  controls. By not disclosing its accreditation and ownership issues, Florida  Coastal School of Law failed to meet the standards of participation.

**Further steps**

Florida Coastal School of Law has 10 days from receipt of  today’s notification to submit factual evidence to dispute FSA’s findings and  seek to demonstrate their inaccuracy. If any such evidence is submitted, FSA  will evaluate it and notify the institution about whether the denial of its  reinstatement application will be modified, rescinded, or remain in place.

The Department is poised to collaborate with state  partners and the school’s accreditor to support students if Florida Coastal School of Law closes precipitously. The Department’s work would include helping students understand their options to transfer their credits to another school  or apply for a closed school loan discharge.

Today’s actions are part of a broader effort by ED to support the needs of America’s students and borrowers and hold for-profit  institutions accountable if they fail to serve students well. In addition to  today’s announcement, the Department recently streamlined the borrower defense relief process, helping approximately 72,000 borrowers  whose institutions engaged in certain misconduct receive $1 billion in loan  cancellation. The Department also has taken a series of steps to provide relief  to borrowers during the pandemic, including extending the pause on student loan payments, affecting 40 million borrowers across the  country, and ensuring hundreds  of thousands of borrowers who have received student loan discharges due to  total and permanent disability can keep their discharges.
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