UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
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In the Matter of Docket No. 94-190-SA
BRYANT & STRATTON BUSINESS Student Financial
INSTITUTE, Assistance Proceeding
Respondent. ACN: 02-10053
____________________________________
Appearances:
Sarah Wanner, Esq., Office of the General Counsel, United States Department of
Education, Washington, D.C., for Student Financial Assistance Programs
Before:
Bryant & Stratton Business Institute (B&S), headquartered in Buffalo, New York, is a proprietary institution of higher education offering business education training programs at a number of locations. It is accredited by the Accrediting Commission of the Association of Independent Colleges and Schools (AICS), and is authorized by the New York State Board of Regents to confer an Associate in Occupational Studies degree. B&S participates in the Federal Family Education Loan (FFEL)See footnote 11, the Supplemental Education Opportunity Grant (SEOG), and the Pell Grant Programs, each of which are authorized under the provisions of Title IV of the Higher Education Act of 1965, as amended (HEA). 20 U.S.C. § 1070 et seq. and 42 U.S.C. § 2751 et seq. These programs are administered by the office of Student Financial Assistance Programs (SFAP) of the United States Department of Education (ED).
An audit review was conducted at B&S by ED's Office of the Regional Inspector General
(OIG), Boston, Massachusetts, covering B&S's compliance with HEA program regulations for
the period July 1, 1987, through June 30, 1991. On August 30, 1994, SFAP issued a final audit
determination (FAD) finding that B&S violated several Title IV regulations. By letter dated
October 14, 1994, B&S appealed the following two of the findings of the FAD: failure to
properly determine satisfactory academic progress (SAP), for which $1,128,040 was demanded;
and failure to properly make appropriate refunds, for which $53,661 was demanded.
Pursuant to 20 U.S.C. § 1091(a)(2) and 34 C.F.R. § 668.7(a)(5) (1990)See footnote 22, a student must
maintain satisfactory academic progress in his or her course of study in accordance with the
school's standards to maintain eligibility to receive Title IV aid. Regulations require that an
eligible institution establish, publish, and apply reasonable standards for measuring students'
SAP. 34 C.F.R. § 668.14(e)(1). Such standards are considered to be reasonable if they comply,
at a minimum, with the rules promulgated by the institution's accrediting agency.
Factors which are recognized as appropriate in determining satisfactory academic
progress include grades, work projects completed, or other comparable factors which are
measurable against the norm. 34 C.F.R. § 668.14(e)(3)(I). In addition, a time frame within
which students must complete their program must be established. 34 C.F.R. § 668.14(e)(3)(ii).
This time frame must be determined based on the student's enrollment status and divided into
increments, not to exceed one academic year. 34 C.F.R. § 668.14(e)(3)(ii)(B)&(C). Institutions
are also required to specify the effect that a course withdrawal or incomplete would have on
SAP, 34 C.F.R.§ 668.14(e)(3)(vi), and must document mitigating circumstances if a student fails
to meet minimum grade point or graduation requirements. 34 C.F.R. § 668.7(c).
B&S's policy required students to meet a minimum number of credits earned and a
minimum cumulative GPA, both of which were set out in a series of tables which were published
in the institution's catalog. In the 1990 catalog, B&S revised its SAP standard tables and added a
new requirement that students must complete a minimum of 67 percent of the credits that they
attempt, rather than the previously required 60%. Consequently, B&S argues that its SAP
standards were reasonable; for the first three years covered by the audit report, they were
consistent with AICS' requirements and, for 1990-91, they exceeded the AICS standards.
SFAP, on the other hand, contends that during the period at issue B&S did not properly
apply its established SAP policy, and did not comply with the requirements of its accrediting
agency. First, SFAP claims that B&S improperly ignored withdrawals in the quantitative
measure of SAP by implementing a procedure under which it did not count course withdrawals
as attempts. It even programmed its computers not to recognize a withdrawal as an attempt.
This is contrary to AICS' standards which define credit hours attempted as "any such hours for
which a student has incurred a financial obligation or for which any financial aid funds have been
disbursed." SFAP argues that this language was meant to exclude from SAP coverage only the
courses that a student never started or never received Federal funds to attend. SFAP maintains
that the school's failure to consider withdrawals had a significant impact upon the calculation of
SAP since students could withdraw from any course up to the eighth week of a quarter without
affecting the student's academic progress.
B&S, contrariwise, claims that this finding is in error because in analyzing completion
rates, SFAP wrongly included all courses from which students withdrew as "attempts." B&S
points out that effective in July 1989, it charged a base tuition for from twelve to eighteen
credits. Thus, after 1989, any student who registered for eighteen credits, and later withdrew
from one or two courses, did not incur financial obligations for the dropped courses and, as such,
any such withdrawals should not be considered as attempts.
It is clear that regardless of whether a student enrolled for twelve or eighteen credits, the
student incurred a financial obligation to pay the flat-rate tuition. Therefore, I find that under
AICS' standards, B&S was required to consider each "withdrawal" as an "attempt" for purposes
of measuring SAP, notwithstanding the fact that some students may have maintained full-time
student status after subtracting the number of credits withdrawn. In a Subpart H proceeding, an
institution has the burden of proving that expenditures were proper, and that it complied with
program requirements. 34 C.F.R. § 668.116 (d). I find that Bryant & Straighten has not met its
burden of proving that it complied with SAP regulatory requirements.
B&S raises three other issues relative to SAP. First, the FAD should be dismissed to the
extent that it holds the school liable for students who meet Federal and AICS standards, but not
its own, since it is unfair to hold B&S to higher standards than those of the accrediting agency.
However, this tribunal has consistently recognized that an institution must apply the standards
that it establishes and publishes. 34 C.F.R. § 668.14(e) requires institutions to maintain
standards for measuring SAP. Although Title IV regulations do not dictate what those standards
should be, once an institution establishes such standards, the institution's students must maintain
SAP in accordance with those standards, despite the fact that these standards may exceed the
minimum standards required by the accrediting agency. See, e.g., In the Matter of Indiana
Barber/Stylist College, Docket No. 94-11-SP, U.S. Dep't of Educ. (March 23, 1995); 34 C.F.R.
§ 668.7(a)(5). See also, In the Matter of Southeastern University, Docket No. 93-61-SA, U.S.
Dep't of Educ. (June 22, 1994) (holding that with regard to an institution's internal procedures
for maintaining documentation in student files, where those procedures are more restrictive than
the evidentiary minimums established by regulation, an institution need only meet the
regulation's requirements in a recovery of funds proceeding.) Indeed, the fact that a school's
SAP policy exceeds the minimum established by an accrediting agency has little or no impact on
whether an institution complies with 34 C.F.R. § 668.7(a)(5). Notably, if the institution can
show its SAP policy exceeds the requirements of its accrediting agency, it has made a
presumptive showing that its policy is reasonable in accordance with 34 C.F.R. § 668.14(e).
However, that fact alone does not relieve the institution of its obligation to follow the reasonable
SAP policy that it has adopted. Therefore, I find that B&S is bound by its own policy. Second,
B&S claims that SFAP improperly included credits from students' prior programs when
measuring SAP. However, since B&S fails to identify what programs and what credits were
inappropriately considered by SFAP, I find that it fails to meet its burden of proof on that claim.
Finally, although B&S challenges SFAP's determination that it improperly administered its
reinstatement policy, it does not present any probative evidence to the contrary. Therefore, this
claim is rejected.
B&S further contends that OIG wrongly applied a 67 percent credit completion standard
to the 1989-90 academic year, when that rate was neither published nor implemented until the
1990-91 year. B&S presented no evidence to establish that a 60 rather than a 67 percent required
completion rate was in effect for the 1989-90 academic year. B&S had issued a Policy and
Procedure statement, with an effective date of February 1, 1989, which established the 67
percent completion rate requirement. It argues, however, that it was never meant to go into effect
on that particular date. I find otherwise. Clearly, the 67 percent standard was published in the
1989-90 as well as the 1990-91 catalogs, as that rate is plainly reflected in the tables. B&S's
tables for both 1989-90 and 1990-91 differ from those in previous years, in that it establishes the
67 percent standard. Thus, I am persuaded that the 67 percent requirement was appropriately
applied to the 1989-90 year and, therefore, OIG's revision of its spreadsheet to reflect this
determination is correct.
B&S also challenges SFAP's use of a dated actual loss worksheet with "inflated" interest
and special allowance (ISA)See footnote 44 factors, instead of a purportedly more recent worksheet with lower
rates, reasoning that ISA factors should be uniformly applied to institutions regardless of when
the questioned loans were issued. SFAP responds that use of the ISA factors from the older
actual loss worksheet is appropriate because it corresponds to the time the ineligible loans were
disbursed and subsequently went into default and it was required to pay interest on the improper
loans until the date of default. However, it is inappropriate to require B&S to repay ISA at rates
which were significantly lowered by SFAP subsequent to the issuance of the older actual loss
worksheet. Notably, SFAP does not dispute that it changed the ISA rate within one month after
issuing the initial actual loss calculation. Thus, use of the more recent actual loss worksheet is
the more appropriate for the calculation of B&S's liability.
SFAP seeks repayment from B&S of $43,015See footnote 55 for loan refunds made late, or to the wrong
party, plus $10,646 in associated ISA. In a GSL or a PLUS loan, an eligible borrower authorizes
the school to pay directly to the lender that portion of a refund from the school that is applicable
to the loan. 34 C.F.R. § 682.607(a). When B&S's guaranty agency, the New York State Higher
Education Service Corp. (HESC), conducted a program review of B&S in 1989, it discovered
that the school had issued late refunds, and also had paid refunds to borrowers, rather than to the
appropriate lenders. After discovering the error, HESC directed B&S to review a sample of
improperly refunded loans that were disbursed from January 1988 through August 1989 and to
project the sample results to the total population of refunded loans to arrive at a total liability
figure. This was accomplished and B&S paid HESC the resulting liability.
B&S argues that HESC, as the designated guaranty agency, acted as an authorized agent
of ED and requiring it to pay an additional liability would constitute an "unjustified penalty."
B&S points to a number of letters between itself and HESC, and claims that they constitute a
binding settlement agreement that fully resolves its liability for the untimely and misdirected
refunds. SFAP denies that the correspondence between B&S and HESC constitutes a binding
and enforceable settlement agreement.
I am unpersuaded by the institution's position that its payment to HESC constitutes a
resolution of the outstanding liability owed by B&S to lenders who were not properly paid
refunds of Title IV loans. Despite the fact that both parties agree that the appropriate calculation
of liability under this finding is through the extrapolation methodology used by B&S and HESC,
B&S determined its liability as $24,563,See footnote 66 while SFAP determined it as $43,015. Consequently,
the question before me is, using the agreed upon formula, what is the proper calculation of
liability. Initially, despite B&S's claim to the contrary, I am not persuaded that a March 19,
1991, letter addressed to B&S's assistant controller from HESC constitutes HESC's agreement
that B&S has calculated the liability correctly. The letter which states in somewhat cryptic
language that "all of our concerns have been adequately addressed," does not refer to the amount
of B&S's liability.
SFAP applied the agreed upon extrapolation methodology to the sample selected by B&S
and determined that the institution improperly refunded $29,494 at the Syracuse, New York,
location, and $51,490 at the Buffalo, New York, location. After crediting B&S for refunds the
school subsequently issued, and for loan funds repaid by the institution's students, SFAP
determined that B&S should pay $43,015. In contrast, B&S argues that it paid $24,567 for loan
refunds made to the wrong party and does not owe any further amount under this finding. B&S
neither shows how it arrived at this total, nor demonstrates that SFAP's implementation of the
extrapolation methodology is flawed or unreliable. Indeed, the fulcrum of B&S's argument rests
on the claim that HESC's March 19, 1991, letter constitutes an agreement that the $24,567 it has
already repaid is the proper calculation of liability. Regardless of the intended purpose of
HESC's letter, nothing therein refers to the amount owed or paid by B&S for improper refunds.
Since B&S failed to meet its burden of proving that its calculation of liability is correct, I find
that B&S owes $43,015 for improper refunds and $10,646 for improper ISA payments.See footnote 77
I FIND the following:
1. Bryant & Stratton failed to meet its burden of proof of showing that during the award
years between 1987 and 1991, the institution properly devised and implemented its satisfactory
academic progress policy.
2. The institution's cohort default rate will be applied to the estimated loss formula
which, when added to the interest and special allowances equals $244,447.See footnote 88 When added to the
$529,324 in Pell Grant Funds and $8,927 in Plus and SEOG Funds, it results in a total liability of
$782,698 for the satisfactory academic progress violations.
3. Bryant & Stratton is liable for $43,015 for improper refunds, and $10,661 in ISA, for a
total liability of $53,676.
On the basis of the foregoing findings of fact and conclusions of law, it is hereby
ORDERED that Bryant & Stratton pay to the United States Department of Education the sum of
$836,374.
_________________________________
Ernest C. Canellos
Chief Judge
Dated: September 16, 1996
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
following:
Yolanda Gallegos, Esq.
Dow, Lohnes & Albertson
1200 New Hampshire Ave., N.W.
Suite 800
Washington, D.C. 20036-6802
Sarah Wanner, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110