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Posted Mar 23, 2017 08:00 am CDT
Sterling Partners may be unloading all three of its for-profit InfiLaw System schools, say some consultants after the announcement that Charlotte School of Law, which is currently on probation for being out of compliance with ABA accreditation standards, plans to affiliate with a nonprofit college in the Northeast.
Scott Broyles, a CSL professor tapped to serve as the school’s interim dean, told the radio station WFAE that the law school hopes to have its federal student loan money reinstated by partnering with an unnamed university in the Northeast. The Department of Education pulled the school’s student loans in January after it determined that CSL made “substantial misrepresentations” to current and prospective students regarding its compliance with ABA accreditation standards. In February, an CSL spokesperson said the school had filed a teach-out agreement with the ABA.
Earlier this month, Arizona Summit Law School announced it will sign an affiliation agreement with Bethune-Cookman University, a historically black college in Florida. And in January, Scott DeVito, dean of Florida Coastal School of Law, told Jacksonville.com that the school hoped to join a nonprofit university. At this point, Florida Coastal is in conversations with “select universities,” DeVito told the ABA Journal Thursday, but no agreement has been reached.
All three InfiLaw schools have both low bar passage rates and low ABA employment data percentages for recent graduates with full-time, long-term jobs that require JDs. Also, the U.S. Department of Education found in January that Florida Coastal did not meet the gainful employment standard. CSL and Arizona Summit were given a “zone rating,” which means the schools were close to not meeting gainful employment standards and must pass the gainful employment standard in one of the next four years to stay in good standing.
“I think Sterling Partners was making enormous profits—for a while they made money hand-over-fist,” says David Frakt. A former Florida Coastal dean candidate, he says he was asked to leave during a 2014 presentation he made as part of the interview process, criticizing the school’s student entrance credentials. Frakt wrote about it at the Faculty Lounge blog at the time.
“It was very obvious to me that the schools were headed to a disaster, because they were forced to admit hundreds of unqualified applicants with little to no chance of success,” Frakt said. “They knew that the profit strategy was to milk these schools as long as they possibly could, eke out a profit, and then Sterling would break it up and dump them.”
If the law schools affiliate with a nonprofit college, Frakt says, that could get them past the gainful employment standard, and get more time from other accreditation groups.
InfiLaw and the dean of Arizona Summit did not respond by press time to ABA Journal requests for comment. Broyles, who replaces CSL dean Jay Conison, was not available for comment.
DeVito disputes the assertion that Infilaw is in dump mode with its schools. According to him, Infilaw has been interested in shifting to a non-profit mode for a while, largely due to what he describes as “an anti-for-profit stigma” that hurts students.
“Becoming a non-profit would help our students be judged on their merits, like donating over 1 million hours of pro bono legal services to our community and having one of the top-rated moot court teams in the nation, not on a caricature of for-profit education,” he told the ABA Journal in an email.
Charlotte School of Law has not filed a formal application about a nonprofit college agreement with the ABA’s Section of Legal Education and Admissions to the Bar, says Barry Currier, the section’s managing director.
“Significant change in the ownership or control of a law school, as well as affiliations or modifications in the organizational structure of a law school, such as changing from for-profit to nonprofit status, are usually major changes in a law school’s program or structure that would require acquiescence from the [section’s] council prior to the change being made consistent with Standard 105 and Rule of Procedure 29,” Currier said in an email. “No formal application for any such change has been filed as of this date. Public reports of any change have been vague. Any request will be processed in accordance with the usual procedures, and a review would take a number of months to complete.”
Details about ownership with the affiliation agreements have been scant.
“My guess would be [Sterling Partners] is trying to salvage its investment,” says David Mulligan, the CEO of Eduvantis, a business and marketing group that works with universities. If that’s the case, he adds, the law schools can probably be had for a good price. However, Mulligan doesn’t see Sterling Partners letting go of the law schools completely.
“My guess is that they can’t just turn this over; they will have to go through a process to salvage their investment, and this is the first step,” he said, adding that what percentage of profits Sterling Partners will earn from the campuses probably is a key negotiation point.
Also, Mulligan speculated that Sterling Partners may make certain guarantees to nonprofit colleges that reach agreements with its InfiLaw schools.
“I suspect Sterling may have to structure a deal that mitigates [the nonprofit university’s risks], that gives them an out if it doesn’t work out,” said Mulligan, who thinks that for nonprofit colleges, partnering with the InfiLaw schools could be “extremely risky.”
“From a business perspective, getting into the law school business is very dubious business decision,” he said. “All of the trend lines are negative.”
However Frakt things that the agreements could work well for both Sterling Partners and the nonprofit colleges who reach agreements with InfiLaw. Accreditors tend to be more sympathetic with nonprofit schools, he said, and with new leadership, the law schools might improve.
“Law schools can be profitable,” Frakt said, adding that while they are expensive to form, it’s quite possible the nonprofit colleges are getting the schools “on the cheap, for very little investment.”
“And there’s a cash flow there, as long as the student loans are flowing,” says Frakt, adding that he hopes the partnerships will be successful.
“I would say that the jury is still very much out on whether these are good moves for universities,” Frakt says. “Each of the three law schools are in a market where there is demand and opportunities for law schools that admit students of modest aptitude.”
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