Dive Brief:

• Three Computer Systems Institute campuses in Illinois and 23 Marinello Schools of Beauty campuses in Nevada and California can no longer participate in the federal financial aid program, thanks to application denials by the U.S. Department of Education this week.
• Consumerist reports that CSI misrepresented job placement rates to the department and its accreditor, claiming dozens of students in its Health Care Center or Business Career programs worked for one of two sham companies set up by the school.
• The beauty school campuses allegedly fabricated high school diplomas of prospective students to help them qualify for financial aid, offered the vast majority of students less aid than they were entitled to, misrepresented their courses to prospective students, and in general, like CSI, did not prepare students for jobs they promised them during recruitment.

Dive Insight:

The Department of Education controls the futures of colleges, universities, and vocational schools with federal financial aid. Schools that built their business models around financial aid often cannot recruit students to fill their classes without it. Corinthian Colleges Inc. famously collapsed when the Department of Education merely staggered its financial aid payouts. Marinello Schools of Beauty had already been on this heightened form of cash monitoring before the department denied its latest application to continue participating in the federal financial aid program.

Both for-profit postsecondary education companies will have a chance to dispute the findings of the department and make their case for continued access to financial aid. The federal government’s tough stance against for-profits has marked the industry since Obama took office in 2008. Only time will tell whether the sector can stabilize and survive in the new normal.