In the Matter of Docket No. 97-169-ST
INTERACTIVE LEARNING SYSTEMS, Student Financial Assistance Proceeding
Appearance: Stanley A. Freeman, Esq., and Joel M. Rudnick, Esq., Powers, Pyles, Sutter &
Verville, P.C., Washington, D.C., for Respondent.
Paul G. Freeborne, Esq., Office of the General Counsel, U.S. Department of
Education, Washington, D.C., for the Student Financial Assistance Programs.
Before: Frank K. Krueger, Jr., Administrative Judge
On November 4, 1997, the Student Financial Assistance Programs (SFAP), U.S.
Department of Education, issued a notice of intent to terminate Respondent's participation in all
student financial assistance programs authorized under Title IV of the Higher Education Act of
1965, as amended. The proposed termination was based on Respondent's cohort default rate
under the Federal Family Education Loan (FFEL) program for fiscal year 1994 of 46.4 percent.
Respondent, on November 21, 1997, appealed the proposed termination, asserting that such
action is inappropriate since the 1994 rate is not its most recent cohort default rate.
Since SFAP has determined that Respondent's final FFEL cohort default rate for fiscal
year 1994 exceeds 40 percent, I am compelled to find that the proposed termination is warranted.
By my Order Governing Proceeding dated December 2, 1997, Respondent was given the
opportunity to demonstrate that the cohort default rate used by SFAP in its notice of termination
is not a final rate determined by the Department under 34 C.F.R. § 668.17(a)(2)(1997). Pursuant
to 34 C.F.R. § 668.90(a)(3)(iv)(1997), Respondent can prevail only if it demonstrates by clear
and convincing evidence that the cohort default rate is not the final rate, and that the correct rate
would result in the institution having a rate of 40 percent or below. See Palm Beach Beauty &
Barber School, Dkt. No. 97-102-ST, U.S. Dept. of Educ. (Oct. 23, 1997); Aladdin Beauty
College #32,See footnote 11 Dkt. No. 97-108-ST, U.S. Dept. of Educ.(Dec. 15, 1997)(on appeal to the
Secretary); Academy for Career Education, Dkt. No. 97-124-ST, U.S. Dept. Of Educ. (Feb. 20,
1998)(on appeal to the Secretary); Jon Louis Schools of Beauty, Dkt. Nos. 96-108-ST and 97-19-
ST, U.S. Dept. of Educ. (April 3, 1998)(on appeal to the Secretary) pp. 15-16; Trend Beauty
College, Dkt. No. 97-173-ST, U.S. Dept. of Educ. (April 28, 1998); and Michigan Beauty
School, Dkt. No. 97-172-ST, U.S. Dept. of Educ. (May 5, 1998).
Respondent's official FFEL cohort default rate for fiscal year 1995 is below 40 percent; its
official cohort default rate for fiscal year 1994, however, is 46.4 percent. Inasmuch as the lower
1995 cohort default rate was formulated subsequent to the 1994 rate at issue, Respondent would
have me dismiss this matter. Respondent, however, fails to recognized that Section 668.17(a)(2)
clearly grants the Secretary the authority to initiate a termination proceeding if an institution has
an FFEL program cohort default rate that exceeds 40 percent for any fiscal year. (Emphasis
added.) As noted above, I am compelled, under the applicable regulatory scheme, to terminate
Respondent absent a showing that the cohort default rate attributed to it is not a final rate and that
the final rate for the year in question would be 40 percent or below.
SFAP made a final determination that Respondent's FFEL cohort default rate for fiscal year
1994 exceeded 40 percent and seeks an order terminating Respondent's eligibility to participate
in all programs authorized under Title IV of the Higher Education Act of 1965, as amended.
Respondent is terminated from participating in all programs authorized under Title IV of the
Higher Education Act of 1965, as amended.
Frank K. Krueger, Jr.
Dated: May 21, 1998
S E R V I C E
A copy of the attached initial decision was sent by CERTIFIED MAIL, RETURN RECEIPT
REQUESTED to the following:
Stanley A. Freeman, Esq.
Joel M. Rudnick, Esq.
Powers, Pyles, Sutter & Verville, P.C.
1875 Eye Street, N.W., 12th Floor
Washington, D.C. 20006
Paul G. Freeborne, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110