IN THE MATTER OF ARISTOTLE COLLEGES, INC.,
Docket No. 89-35-S
Student Financial Assistance Proceeding
Appearances: Peter S. Leyton and Richard A. Fulton, Esq. of Washington, D.C., for the Respondent
Brian P. Siegel, Esq. of Washington, D.C., Office of the General Counsel, United States Department of Education for the Office of Student Financial Assistance
Before: Judge Allan C. Lewis
On October 25, 1991, the Secretary remanded this matter to the
Administrative Law Judge for further consideration in light of
his decision in In re Michigan Paraprofessional Training Institute, Dkt. No. 90-7-ST, U.S. Dep't
of Education (Sec. Dec. Aug. 28, 1991). In the Secretary's view, a disqualification
proceeding before the Department under Section 432(h)(3) of the
Higher Education Act of 1965, as amended by Section 402(a) of the
Higher Education Amendments of 1986, Pub. L. No. 96-374, 100
Stat. 1263 (to be codified at 20 U.S.C. § 1082(h)(3)) is a
limited procedure "where the guaranty agencies determine the
facts within a framework established by the Secretary, with the
Secretary's review [in the disqualification proceeding] limited
to whether the framework was appropriately applied." In re Aristotle College, Dkt. No.
89-35-S, U.S. Dep't of Education (Sec. Dec. Oct. 25, 1991) at 4. Under such a standard, it is
concluded, for the reasons stated below, that Aristotle Colleges,
Inc. (Aristotle) is disqualified from participating in the
guaranteed student loan program.See footnote 1
In Michigan, at 2, the Secretary held that the general framework of the review consisted of two
principle issues, namely--
1. Whether the agency took action on the basis of
substantive agency requirements regarding eligibility
that were not more onerous than those in effect for
schools participating in the Federal Insured Student
Loan Program as of January 1, 1985; and,
2. Whether the agency took that action in accordance
with procedures that were substantially the same as
those that govern the limitation, suspension or
termination of a school's eligibility under the Federal
Insured Student Loan Program.
In addition, the Secretary amplified upon the nature of the
review framework in Aristotle and held that factual findings of
the guaranty agency are "relevant to the Secretary's review only
to the extent that they are insupportable as a matter of law."
Aristotle, at 5. As a corollary to this proposition, it appears
that a fourth issue for consideration in this process is whether,
as a matter of law, the guaranty agency correctly interpreted and
applied the substantive requirements. These issues are addressed
On April 24, 1989, a guaranty agency, the Higher Education
Assistance Foundation (HEAF), notified Aristotle that HEAF
proposed termination of Aristotle's participation in its
guaranteed student loan program. The proposed termination was
effective on May 24, 1989, unless Aristotle requested a hearing
or submitted written information pertinent to the alleged
violations by May 9, 1989. Aristotle did not request a hearing
or submit written materials within this period and, accordingly,
the termination was effective on May 24, 1989.
HEAF's termination was based on 16 findings which detailed
various violations of 34 C.F.R. Parts 668 and 682 (1988), the
then current regulations of the Department governing the
substantive rules of the student financial assistance program in
general and the guaranteed student loan and PLUS programs in
particular.See footnote 2 The current regulations
violated by Aristotle as determined by HEAF and their corresponding regulations in effect
as of January 1, 1985, are as follows:
Finding Descrip. of Violation 1987 Reg. 1985 Reg.
1. improper loan disbursements . . . 682.604(e) 682.607(f)
2. failure to make refunds . . . . . 682.607 682.610
3. deficiencies in satisfactory progress policy . . . . . . . . . 668.14(e) 668.16(e)
4. failure to timely terminate students for lack of attendance . 668.14(e) 668.16(e)
5. absence of available documentation . . . . . . . . . . 668.23(f) 668.12(c)
6. no documentary evidence re ability to benefit . . . . . . 668.7(a)(3) 668.6(c)
7. necessary documentation re dependency status . . . . . . . . 682.2 682.301(d)
8. failure to obtain financial aid transcripts . . . . . . . . . . . 668.19 668.14
9. unacceptable default rate . . . . 668.15 668.17
10. calculation of need by wrong methodology . . . . . . . . . . . 682.301(f) 682.301(f) 682.610(b) 682.612(b)
11. absence of written policies on verification . . . . . . . . . . 668.53 *
12. absence of Pell Grant calculation . . . . . . . . . . . ** **
13. lack of certified information re income for loan eligibility . . . 682.301 682.301
14. mismatching of loan period and academic period . . . . . . . *** ***
15. inaccurate enrollment information reported to lenders and HEAF . . . . . . . . . . . . 682.610 682.612
16. failure to respond to HEAF inquires . . . . . . . . . . . . 682.14 668.16
* This regulation had no counterpart in the substantive
regulations in force as of January 1, 1985.
** The Pell Grant program is not overseen by the guaranty agencies and, therefore, this purported violation has no relevance in this proceeding. 34 C.F.R. Part 690, Subpart G.
*** There is apparently no regulation on this point.
The regulations at issue in findings numbered 1 through 10, 13,
15, and 16 are identical or substantially similar in all
pertinent, material aspects to their counterpart regulations in
effect as of January 1, 1985. As noted above, finding 12 is not
relevant in a guranteed student loan program determination; finding 14 had no apparent
substantive basis in the regulations;
and finding 11 had a substantive foundation based upon a
regulation which was not in effect as of January 1, 1985. As
such, it may be argued under a literal interpretation of Section
428(b)(1)(T) of the Higher Education Act of 1965, as amended, (20
U.S.C. § 1078(b)(1)(T)), that these aspects of the HEAF
determination reflect eligibility requirements which are more
onerous than the requirements in effect as of January 1, 1985.
However, given the number of different violations and the
severity and magnitude of these other violations, these matters
constitute a de minimis aspect of HEAF's ultimate determination,
and therefore, are entitled to little weight in this
disqualification proceeding. Accordingly, for purposes of this
proceeding, the regulations applied by HEAF were not more onerous
than those in effect under the Federal Insured Student Loan
Program as of January 1, 1985. Therefore, the HEAF termination
satisfies the first criteria necessary for disqualification.
HEAF's procedural rules governing the termination of a
participant's eligibility to participate in its guaranteed
student financial assistance program are set forth in its
Bulletin L/S No. 61. Since Aristotle did not request a hearing
before HEAF, the only relevant aspect of the HEAF hearing process
in this proceeding is limited to HEAF's termination notice rule.
In this regard, HEAF's notice requirement (paragraph 7) is
similar in all respects to the Department's notice requirement in
effect as of January 1, 1985, which is set forth in 34 C.F.R. § 668.77(b) (1984). That is, a notice must be sent by certified
mail, with return receipt requested; it must cite the particulars
and consequences of the intended action and identify the alleged
violations; the termination shall not be effective not less than
20 days from the date of the mailing of the letter of intent; and
if an institution requests a hearing within 15 days of the
mailing date of the notice, the termination date will be
automatically delayed until after a final determination is made
through the process. Therefore, the second criteria necessary
for disqualification is satisfied.
While unnecessary however, it is determined, for the sake of
completeness, that the remaining procedures within HEAF's
termination process are also substantially the same as the
Department's procedures. Thus, for example, the HEAF hearing is
conducted by a presiding officer in which a written record is
made; evidence is presented at this hearing and the presiding
officer renders an initial decision based on the evidence; and
the initial decision may be appealed to a higher authority within
the agency. Compare paragraphs 7 and 8 of HEAF's rules with 34
C.F.R. §§ 668.79 and 668.81. Hence, HEAF's procedural rules are
not more onerous than the Department's regulations in effect as
of January 1, 1985.
The third criteria in the disqualification action, according to
the Secretary's decision in Aristotle, is whether the factual
findings of the guaranty agency are insupportable as a matter of
law. In this case, the institution did not contest the
termination action before the guaranty agency. Hence, the
factual findings of HEAF were not disputed and, therefore, there
is nothing to review regarding this matter in this proceeding.
Lastly, Aristotle has not contended in this proceeding that HEAF
misinterpreted the substantive regulations in its determination.
Its position was that the facts relied upon by HEAF were
incorrect or that existing violations had been corrected. A
review of HEAF's determination confirms that, as a matter of law,
HEAF interpreted the substantive regulations correctly. Thus,
the third and fourth criterion for disqualification are
satisfied. Hence, it is appropriate to disqualify Aristotle from
its eligibility to participate in the guaranteed student loan
In view of the above, it is HEREBY ORDERED that Aristotle is
disqualified from its eligibility to participate in the
guaranteed student loan program.
Allan C. Lewis
Administrative Law Judge
Issued: November 1, 1991
On November 1, 1991, a copy of the attached decision was sent by
certified mail, return receipt requested, to the following:
Brian Siegel, Esq.
Office of the General Counsel
U.S. Department of Education
Room 4091, FOB-6
400 Maryland Avenue, S.W.
Washington, D.C. 20202
Peter S. Leyton, Esq.
White, Fine & Verville
1156 15th Street, N.W.
Washington, D.C. 20005