Federal Student Aid and International Education Corporation Settle Agreement Over Student Aid Eligibility Violations

The U.S. Department of Education issued a settlement agreement today with for-profit school owner International Education Corporation (IEC) and its subsidiaries – Florida Career College (FCC) and United Education Institute (UEI), which also operates under the brand name, UEI College (UEIC) – in relation to violations of the ability-to-benefit (ATB) test regulations.

These regulations govern eligibility for federal student aid for students who lack a high school diploma or GED equivalent.

An investigation conducted by the Department in 2023 discovered that FCC regularly violated the rules regarding the administration of ATB tests. The Department found that FCC, along with senior leaders of IEC, exerted pressure on proctors to pass students and manipulated test outcomes to increase the enrollment of students receiving federal aid at IEC schools.

The Department also discovered that FCC test proctors and employees altered or completed answers after students finished their tests, assisted students during testing or took tests on their behalf, and allowed students to use calculators in violation of testing rules.

This misconduct was aimed at maximizing enrollment and school profits by recruiting and enrolling students regardless of their ability to benefit from the program. More than half of the FCC students enrolled through ATB tests dropped out of the program without obtaining a degree, but with considerable student loan debt.

The settlement announced today follows an investigation into UEI/UEIC for ATB violations similar to those identified at FCC.

Specifically, the settlement agreement:

  • Confirms the Department’s termination of FCC’s participation in the federal student aid programs and concludes any further appeals by the school.
  • Imposes strict conditions for three years on UEI/UEIC’s continued participation in the federal student aid programs, including the prohibition of using ATB exams to qualify students for enrollment with federal student aid funds, and the requirement to retain marketing and recruiting materials for ongoing Departmental oversight.
  • Makes the separation of IEC’s CEO and CFO, who were involved in the widespread wrongdoing, a prerequisite for UEI’s continued participation in the federal student aid programs. And,
  • Mandates that IEC provide the Department with a letter of credit worth over $6 million, which the Department can utilize to cover any liabilities or loan discharges related to the misconduct in question.

As part of this resolution, the Department’s office of Federal Student Aid (FSA) has agreed that any future administrative actions arising from this conduct will be limited to recovering loan discharges and other liabilities covered by the $6 million letter of credit.

“This robust agreement with International Education Corporation demonstrates Federal Student Aid’s dedication to holding schools and individuals accountable for adhering to the laws and regulations governing the federal student aid programs,” stated FSA Chief Operating Officer Richard Cordray. “Our Enforcement Office will continue to investigate reports of misconduct by schools and individuals to safeguard the integrity of our programs.”

The complete settlement agreement announced today can be found on the Department’s FOIA Reading Room.

Violations of the ATB regulations

The ATB tests are meant to provide an avenue for students without a high school diploma or GED equivalent to access federal financial aid by passing a test that demonstrates their ability to benefit from postsecondary education. Applicants who fail to prove their ability to benefit through testing are more likely to struggle or drop out of their academic programs and accumulate student loan debts that they may be unable to repay. In order to prevent schools from improperly influencing test administration to boost enrollment and ensure that students do not end up with unaffordable debt, the regulations require that ATB tests be administered independently from the school the student wishes to attend. Violations of the rules and regulations governing the ATB testing process significantly harm affected students and undermine the integrity of the federal student aid programs.

The interference by FCC officials in the administration of ATB tests harmed students and the Title IV programs. Between 53% and 57% of FCC’s ATB students withdrew from their programs each year without obtaining a certificate from Academic Years 2016 to 2021.

Nevertheless, the students who withdrew and were unable to obtain a credential face financial burdens due to their enrollment. In the four years prior to the Department’s action, between 81% and 88% of the ATB students who withdrew from FCC remained incurring debt or exhausted their eligibility for Federal Pell Grants, often both.

As a result, these applicants have been denied future opportunities to receive financial assistance and are arguably worse off than if they had never attended the school.

Protecting students

In addition to holding IEC, FCC, and UEI/UEIC officials accountable, FSA has assisted students as FCC exits the federal student aid programs. Specifically, FSA collaborated with FCC’s accrediting agency and state higher education officials to provide students with information on their options to enroll at other schools.
FSA also furnished students with details on how to apply for relevant loan discharges, such as false certification discharges for students who were wrongfully enrolled through ATB testing or borrower defense discharges if FCC misled students or engaged in other misconduct.

In its enforcement actions against FCC in 2023, the Department prohibited the school from admitting new students, but allowed it to continue offering federal student aid until January 31, 2024, to give enrolled students the chance to complete their FCC programs if desired.

On January 30, 2024, FCC officials notified the Department of the school’s closure on February 15, 2024. Since the Department prohibited new enrollments beginning in April 2023, no students receiving federal student aid will be attending FCC by the closure date. This week, the Department will update information for former FCC students at StudentAid.gov/announcements-events/florida-career-college.

Today’s action illustrates the Department’s ongoing commitment to enforcing higher education laws and regulations while safeguarding students, taxpayers, and the integrity of the federal student aid programs.