The U.S. Department of Education has cut off federal student financial aid to Union Institute & University and will fine it $4.3 million over multiple allegations, including that the private nonprofit college illegally took in more aid than it was entitled.
The Ohio institution repeatedly “misused Title IV funds to the detriment of its students, the department and taxpayers,” the U.S. Department of Education wrote in a letter earlier this month.
The department is fining the university for multiple violations of federal law, it wrote. The agency accused Union Institute of taking about $43,500 more in financial aid than it needed, most of which it has not paid back. It also failed to refund students more than $753,000 in aid, the Education Department said.
Cutting the institution off from federal money could spell its demise. Union Institute has maintained it will not close, despite repeatedly postponing its fall classes and facing multiple lawsuits over alleged unpaid rent and payroll.
Union Institute did not immediately respond to a request for comment Tuesday.
Union Institute employees and students have continually raised concerns about the university this year. It has many of the hallmarks of an institution teetering on closure, including declining enrollment, related financial issues and mounting legal troubles.
Its headcount plummeted from 1,666 students in fall 2012 to 787 in fall 2022, according to federal data. Declining tuition contributed to the university operating at a deficit in every fiscal year since 2018, publicly available tax documents show.
The university’s financial struggles became more apparent this year when employees started complaining publicly about Union Institute missing payroll, although this issue reportedly began as early as December 2022.
The skipped paychecks prompted questions about the institution’s financial position, and though Union Institute President Karen Schuster Webb repeatedly reassured staff the university would remedy the situation, it did not.
In April, a Union Institute employee filed a lawsuit in federal court over the missed pay. That class-action case is ongoing.
The situation worsens
Union Institute’s financial troubles expand far beyond missed pay, as the Education Department’s letter revealed.
The university hasn’t paid employees since mid-August, according to the department.
Further, the agency said that Union Institute had misused federal student aid, earmarking some of that money to cover other expenses.
Under federal law, Union Institute needed to pay students or parents any surplus federal financial aid after accounting for the cost of tuition and other fees.
But the Education Department said the university did not do this, instead redirecting those credits to pay for the institution’s own expenses.
The university identified more than $753,000 in credits owed to 157 students, according to the Education Department. The department said that at the end of August, the university explained it could not refund that money because it had been held in an account that a bank subsequently drained to pay off the institution’s delinquent credit cards.
But the Education Department said it could only account for $200,000 of those owed credits, and that the university has not explained where it stashed the remaining $553,000.
The Education Department said that in early September, a Union Institute official told it most of the university accounts were empty.
The agency alleged that Union Institute also illegally took other federal financial aid to meet its expenses. On five occasions through June and July, the university drew thousands of dollars more than it needed in financial aid from the federal government, according to the letter.
Colleges can draw more federal aid as they need it, but must be able to prove they’re disbursing it to students — Union Institute never did, the letter said.
The Education Department contacted the university in September, demanding it repay the roughly $43,500 by Oct. 5.
Though university officials agreed to do so, they have so far only sent only $5,000 of that money, the Education Department said.
The university “cannot be trusted to administer the Title IV programs in accordance with the Department’s regulations,” the department wrote.
It has given Union Institute until Nov. 27 to appeal the fine and cancellation of its Title IV access.
Months before the fine, in August, the Education Department had essentially iced Union Institute’s access to federal funds through a sanction known as heightened cash monitoring 2.
This meant the Education Department wouldn’t advance the university any financial aid — the institution needed to pay out of pocket and then seek department reimbursement.
Because of that new structure, the university hasn’t received any federal aid since August.
And in September, the Education Department mandated the university post a $12 million letter of credit by mid-October to continue accessing federal funds.
The Education Department hadn’t received that as of mid-November.
Further compounding Union Institute’s problems was its accreditor, the Higher Learning Commission. In September, HLC deemed it a financially distressed institution.
The label meant Union Institute remained accredited, but it signaled HLC had “serious concerns about its resource base to support its educational programs.”
HLC officials visited the campus in October to learn about its financial situation.
The accreditor had demanded the university develop teach-out agreements that would enable students to transfer elsewhere, according to the Education Department, but it “failed to timely submit that plan.” HLC also told the Education Department that Union Institute was behind on its membership dues and other expenses, according to the letter.
A judge this month also authorized an eviction of Union Institute at its facility in the Cincinnati neighborhood of Walnut Hills. The building’s landlord alleged Union Institute owes hundreds of thousands of dollars in back rent.