Large Aid Recipient's Courses Barred From Receiving Federal-Loan Funds
Washington--The Education Department last week acted to bar from participation in federal student-loan programs an Indianapolis-based trade school that now takes in more than $1 million a week in federal aid payments for four correspondence courses.
Officials announced at a press conference here that the department was taking its "strongest administrative action" against Superior Training Services Inc., a company they said ranks among the top five largest recipients of federal student-aid funds in the country.
The firm had misrepresented the length of four truck-driving and heavy-equipment-operations courses in its original applications for eligibility in the aid programs, according to department officials.
"We are putting out of business their correspondence courses," Kenneth D. Whitehead, assistant secretary for postsecondary education, said at the press briefing.
Mr. Whitehead described the department's action as part of an effort to crack down on fraudulent proprietary schools and to provide consumer protection to students who take out loans to pay tuition at such schools. The issue is a top priority for Secretary of Education Lauro F. Cavazos, he added.
After nearly two years of investigations and negotiations with the company, Mr. Whitehead said he had concluded that Superior "does not qualify, and has never qualified" for participation insofar as its correspondence courses are concerned.
The department said students currently enrolled in Superior's correspondence programs have become, because of the department's action, ineligible for federal Pell grants or guaranteed loans.
Income from federal grants and guaranteed student loans accounts for 95 percent of Superior Training Services' revenues, according to the department.
Ward Degler, a spokesman for the company, said officials were surprised by the department's action because negotiations towards a settlement had been continuing.
"Their only real concern is the length of the course," Mr. Degler said. "We had agreed some time ago to extend the length of the courses."
Mr. Whitehead said that he had completed in less than an hour several of the truck-driving correspondence lessons, which the company claimed involved up to 12 hours of study each.
The company will seek an injunction to stop the Education Department's action, Mr. Degler said.
The company also faces a $366-million suit filed in September by the Justice Department for damages in connection with the alleged submission of false documents for student-aid eligibility.
The company is negotiating a settlement with the Justice Department, Mr. Degler said.--mw