Photographer: Getty Iamges

A Blown Deadline Could Cost a For-Profit School Millions

Some 170 students could have their federal loans canceled as a result.

Charlotte School of Law has lost its license to operate in North Carolina after failing to finalize a deal offered by Education Secretary Betsy Devos before a state-imposed deadline. The school's future is now in doubt, opening the door to millions of dollars in potential debt relief for its students.

The Obama administration in December accused the school of misleading its students about its accreditation and former students’ bar-passage rates and banned it from accessing federal student aid—the lifeblood of most U.S. colleges. The school, indirectly owned by two funds operated by the Chicago-based private equity firm Sterling Partners, denied the allegations and has attempted to convince the Trump administration to reverse the Obama-era decision. Avi Epstein, general counsel and chief compliance officer for Sterling Partners, did not respond to a message seeking comment.

DeVos offered a lifeline to Charlotte Law after it hired Lauren Maddox, the adviser who shepherded her through the confirmation process. Maddox’s employer, the Washington-based Podesta Group, received some $130,000 in fees from the school to lobby DeVos’s agency and Capitol Hill, congressional records show.

On June 21, the University of North Carolina Board of Governors barred the school from enrolling new students and demanded that Charlotte Law meet various conditions by Aug. 10 to maintain its state license. Regaining access to federal student loan funds was one of those conditions. The Education Department required the school to put up $6 million in collateral, among other demands. In a letter dated Aug. 10, the school told state authorities that it had received a commitment from a bank to guarantee that sum.

The feds and Charlotte Law failed to strike an agreement by Thursday’s deadline. As a result, Charlotte Law’s license expired, said Josh Ellis, a spokesman for the UNC system. Without a license, the school can’t legally operate in the state, officials said.

"We believe we will be able to demonstrate compliance in short order," Charlotte Law spokeswoman Victoria Taylor said in a prepared statement.

The school has petitioned its licensing agency to extend the deadline while it negotiates with the Education Department. The licensing agency could retroactively extend the deadline, state officials said. Liz Hill, an Education Department spokeswoman, said discussions with Charlotte Law are ongoing. 

If the school officially shuts down, its remaining students could cancel their federal loans, leaving the school and its owners on the hook for potentially millions of dollars.

The loss of Charlotte Law’s state license should give students the right to loan cancellations immediately, said Clare McCann, a higher education expert at Washington-based policy organization New America, but it’s unclear whether the feds agree. The potential losses, she said, could also hurt other schools indirectly owned by Sterling Partners funds—Arizona Summit and Florida Coastal law schools.

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