After Mount Ida, AG seeks tougher college oversight

Attorney General Maura Healey on Thursday called for greater state oversight of private colleges to prevent another fiasco like the abrupt closing of Mount Ida College, which disrupted the lives of hundreds of students, faculty, and staff and left officials struggling to respond.

“The state can’t be a passive player here; we need better oversight and better accountability,” Healey said in a telephone interview. “If we leave it to the hands of a private institution, I think we’ve seen that this isn’t going to work.”

Mount Ida College announced in early April that it would close in mid-May. Leaders of the liberal arts college in Newton failed to notify state regulators ahead of time or create a contingency plan for how students would finish their degrees.

Following the school’s closing, the attorney general’s office fielded more than 100 calls from families asking where students could continue working on their degrees or how to seek to have student loans forgiven, Healey said.

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To avoid a similar situation in the future, she proposes creating an office of financial oversight at the Department of Higher Education that would work with schools and accreditors to monitor colleges and look for signs of trouble. She called on the governor and Legislature to fund such an office.

The office would keep track of schools deemed “at-risk” by the US Department of Education, and schools with very low credit ratings, poor graduation rates, or high numbers of graduates unable to repay their loans. The office could, for instance, require schools that appear to be financially unstable or on the brink of closing to create contingency plans for how students would finish their degrees elsewhere.

State officials could also ensure that schools with signs of trouble have sufficient cash reserves to shut down in an orderly fashion and encourage open dialogue about mergers and orderly wind-downs with the Department of Higher Education. Healey said the process would be collaborative, not antagonistic. “This whole experience,” she said, “confirms for me that if we don’t take proactive steps, the chaos, the distress experienced by Mount Ida students, staff, and faculty is just going to happen again.”

She said state officials should be aware of which schools might be on the brink before they read about a closure in the newspaper, as happened with Mount Ida. A college is required to notify the state if it’s closing, but Mount Ida did not.

“We’ve got to act now, because there will be more Mount Idas,” Healey said.

Last week, Healey’s office approved the purchase of the Mount Ida campus by the University of Massachusetts Amherst, albeit reluctantly. Some criticized the deal for allowing UMass to scoop up the 72-acre campus at a bargain price. At the time, Healey said it was a better option than allowing Mount Ida to file for bankruptcy protection.

The Department of Higher Education would welcome the type of new office Healey is proposing, according to the chairman of the Board of Higher Education.

“We welcome a recognition that our state is better off when the Department of Higher Education has the authority and resources and then the responsibility to do a good job preventing more of this,” said chairman Chris Gabrieli. He said the department is also taking its own look into changes that could help prevent another situation like Mount Ida.

Healey’s proposal comes amid predictions by
specialists that many small colleges will close in the next few years, because of shifting high school population demographics and the fact small, private colleges have become so expensive.

Meanwhile, Richard Doherty, president of the Association of Independent Colleges & Universities in Massachusetts, which lobbies on behalf of private colleges, said he
favors preventing another situation like Mount Ida but has concerns about Healey’s proposal.

Mount Ida, he said, did not follow existing procedures for closing a school. “Things already do exist; they just weren’t followed here,” he said. 

He cautioned that it could be difficult for state officials to assess a school’s financial health and future viability, but said Healey’s office seems to understand that nuance. 

Doherty disputed the idea that many more small schools will close in the next few years, saying that many have done a good job to reinvent themselves and become financially stable. “I don’t think the [demographic] challenges that are before us now are absolutely insurmountable, but it varies from campus to campus,” he said.

Private colleges are also monitored by a regional accrediting agency, the New England Association of Schools and Colleges. When it puts a school on probation, which can happen for a variety of reasons, the school must create the type of contingency plan Healey is talking about.

David Angel, chairman of the accrediting agency’s Commission on Institutions of Higher Education and president of Clark University in Worcester, said he likes the idea of more state oversight, as long as it ensures schools have every opportunity to survive.

He also suggested the state collaborate with accreditors, so as not to duplicate work.

“I think that the AG is correct, that more can be done, really, by way of contingency planning to protect students,” he said.

Healey’s office is also investigating the Mount Ida Board of Trustees and top administrators, including former president Barry Brown. The investigation, by the AG’s public charities division, centers on whether the board and school officials violated their legal duty to act in Mount Ida’s best interests.

“We need answers as to how this came to be,” Healey said, “and what the actions of the trustees were, what they knew, when they knew it, and did they exercise their fiduciary duty to the institution.”

On Thursday, UMass released a copy of the 442-page purchase agreement with Mount Ida, in response to a public-records request. The document reveals Mount Ida had about $48 million in long-term debt, including $23 million owed to a private lender, Carlson Property LLC. Carlson Property is a shell corporation funded by Rosalie Stahl, a 98-year-old real estate investor and longtime personal client of Brown,
the former Mount Ida president. Brown is a trustee of Stahl’s personal trust.

In addition to a $12.5 million loan listed in the school’s financial reports, the document reveals Mount Ida had a $10.5 million line of credit with Carlson. Carlson agreed to forgive $11.5 million of the combined $23 million as part of the sale to UMass, the document shows.

Carlson’s loans carried much higher interest rates than the school’s 30-year bonds.

Laura Krantz can be reached at [email protected].