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DOE Settles Loan Misappropriation Suit with 'Freestanding' Law Schools  

A cohort of five “freestanding” law schools settled a lawsuit with the U.S. Department of Education after being accused of improperly distributing student aid funds.

thumb down 1426814 640The department announced the settlement came in the wake of an investigation regarding Title IV funds disbursed to students enrolled in “unaccredited” Master of Laws programs. “Today’s actions demonstrate our commitment to protect the integrity of the federal student aid programs,” said Federal Student Aid Chief Operating Officer Richard Cordray. “Through our ongoing work, we will continue to protect both students and taxpayers.”

The investigation, which was conducted by Federal Student Aid, included New York Law School, Brooklyn Law School, Albany Law School, New England Law–Boston and Atlanta’s John Marshall School of Law, per the announcement.

According to the Department of Education, approximately $2.9 million was incorrectly awarded to 92 students between July of 2017 and June of 2022. As a result of the settlement, the schools will be expected to reimburse the department for losses associated with the improperly distributed funds, cease distributing the funds to students not enrolled in eligible programs and each had to agree to forgo seeking reimbursement for the settlement from active or former students.

From X (formerly Twitter)

Richard Cordray @FSACOO

"The Federal Student Aid (FSA) Enforcement Office continues to uphold the integrity of our programs. Today, @usedgov announced decisive action against five law schools FSA investigated for disbursing aid to students enrolled in unaccredited programs. Learn more:"

Normally, participating schools are responsible for making sure the distribution of Title IV funds is done in line with its statutory requirements, and only students enrolled in its eligible programs are supposed to be given access to the money so long as it is “within the scope of the [Department of Education’s] recognition of the school’s institutional accrediting agency,” it adds.

The freestanding schools, which are not affiliated with broader university systems, generally must be accredited by the American Bar Association (ABA) like other schools offering Master’s programs alongside their Juris Doctor programs. However, the investigation found the schools failed to secure that accreditation and, therefore, are unable to use those funds for their Master’s programs.

“Schools are responsible for ensuring they have institutional accreditation recognized by the Department, including any program for which they intend to disburse Title IV funds. The Department will continue to hold schools accountable if they fail to fulfill this responsibility,” it adds.

The announcement also notes the agreements “do not constitute an admission of wrongdoing or liability by the schools.”

The ABA list of freestanding law schools includes the five named in the lawsuit as well as several others:

  • Appalachian School Of Law
  • Ave Maria School Of Law
  • California Western School Of Law
  • Charleston School Of Law
  • Florida Coastal School Of Law
  • Mitchell Hamline School Of Law
  • South Texas College Of Law Houston
  • Southwestern Law School
  • Vermont Law School
  • Western Michigan University

Lastly, this agreement represents the second time since 2021 an ABA-accredited law school improperly disbursed Title IV funds, however, that school was not fined after it self-reported the error.

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