For-Profit Beauty School Chain Shuts Down Just Days After Losing Federal Funding

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Just days after losing access to federal student financial aid because it allegedly falsified records and overcharged students, the for-profit Marinello Schools of Beauty has  shuttered all of its campuses.

B&H Education, which operated the beauty school chain, announced the closure of its campuses in California, Nevada, and Utah on Thursday, and plans to close its remaining locations in Kansas and Connecticut today, leaving about 4,300 student without a school and 800 employees without a job.

Marinello sent letters to students on Thursday detailing its decisions to shutter its operations, and informing them that a series of meetings will be held next week to provide directions on how to receive transcripts, proof of training and information about their transfer options.

“We want you to know that we did everything in our power to avoid this unfortunate conclusion and keep your school open,” the school said in a letter to students. “Unfortunately, the Department of Education’s unprecedented and unfounded actions left us with no other option except to close our schools.”

Problems for the for-profit beauty school came to a head Monday, when the Department of Education revoked the school’s ability to participate in federal financial aid programs, alleging that some campuses fabricated high school diplomas so that students would be eligible to receive financial aid.

Some schools also limited the amount of federal financial aid funding students could receive, even when they were eligible for more funding, forcing students to make high monthly payments out of pocket to cover the full cost of the school, according to the DOE notice [PDF].

In a sample review of student financial aid awards, the Dept. found that 92% of those students were given less aid than they were entitled to.

During the 2014-15 school year, the Marinello school chain — with 56 campuses across the country — received more than $87 million in Pell Grants and federal loans, according to the Dept.

“Students were threatened with suspension if the monthly payments were not made,” the Department alleges in its notice. “Marinello failed to increase student loan awards even when students explained that the payments were causing an extreme financial hardship, or that they needed extra funds for child care or transportation.”

In some cases, students told the DOE they had to withdraw from the school because they were unable to make the required payments.

Additionally, the school was found to have misrepresented its courses to prospective students, failed to provide equipment or necessary materials to complete programs, and were charged excessive fees for make-up hours.

The Dept. determined that Marinello had lured students into taking out loans for programs that didn’t adequately prepare them for jobs they were promised.

In all, the Department’s decision affected 23 Marinello locations in Las Vegas, Los Angeles, Burbank, Moreno Valley, and Sacramento, CA, that enroll about 2,100 students.

A spokesperson for Marinello told The Washington Post at the time that the company had complied with the Department’s demands, but that the agency had made the decision to delay funding for the past two months.

“When the department began to withhold funds from our deserving students two months ago, we pleaded with the department to provide even basic information about its concerns, yet it refused to do so,” the spokesperson said, in a statement Thursday. “We are confident we would have been able to address them. The department waited until we were past the point of no return financially to allow us any opportunity to respond to its unfounded allegations.”

Still, the Post reports that the Department’s allegations were just the tip of the iceberg for the for-profit chain.

The California Bureau for Private Post Secondary Education barred the school from enrolling new students at its 45 locations in the state in January following accusations that the college failed to meet minimum operating standards.

Before that, the Post reports, all Marinello schools were placed on “heightened cash monitoring” by the federal government for issues including turning in late financial statements, having accreditation issues or operating with a lot of debt.

It’s unclear what will happen to Marinello’s students, but some lawmakers are already calling for the Department of Education to erase their student loan debts.

“The Department of Education has the ability to discharge all federal student loan debt for these students,” said Connecticut Sen. Chris Murphy, in a statement. “I encourage them to expedite the process so that these borrowers can get their money – and their right to a real education – back in their own hands.”

Beauty school chain shuts down days after tangling with the government [The Washington Post]