Cayman’s St Matthews Medical School uses US funds loophole
From Bloomberg Businessweek
For-Profit Caribbean Medical Schools Use Federal Funds Loophole
By Janet Lorin December 03, 2013
For-profit Caribbean medical schools that don’t have access to U.S. federal loans are finding a way around the rules: Encouraging some students to enroll simultaneously in online master’s programs at U.S. universities.
At least nine of about three dozen island medical schools ally with U.S. colleges, making available a financial-aid loophole that lets online students receive loans for living expenses. Some medical students are using funds from their Web-based programs to support themselves in the Caribbean.
The loans help students afford Caribbean schools, which accept thousands of U.S. applicants who fail to win a spot stateside. Since 2000, 24 medical schools opened in the region, according to a 2010 report in Academic Medicine, the journal of the Association of American Medical Colleges. Only four Caribbean schools qualify for federal loans. The partnerships also benefit the U.S. universities by boosting online revenue.
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“This is a shenanigan on the part of both institutions to play the U.S. Department of Education,” said David Longanecker, president of the nonprofit Western Interstate Commission for Higher Education, who was an assistant secretary at the Education Department from 1993 to 1999. “This is clearly a conduit for federal assistance for unauthorized institutions.”
Through the graduate Stafford loan program, students attending U.S. schools, whether online or on campus, can take out as much as $20,500 a year for tuition, room, board, books and transportation. Federal PLUS loans let graduate students borrow up to the cost of attendance, minus other aid received.
Living Expenses
Urbana University in central Ohio began a partnership with American University of Antigua this year, said David Ormsbee, Urbana’s vice president of enrollment management. About 48 AUA students are registered in the healthcare management MBA and Urbana would like to increase the number to 300, he said.
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Using loan funds to cover living expenses is an advantage for the Caribbean students, Ormsbee said.
“The federal government doesn’t seem to be concerned about that as long as they meet the requirements at a school like ours,” Ormsbee said.
Plymouth State University in New Hampshire, which formed an alliance with AUA in 2009, tells medical students also enrolled in its MBA program that they “are welcome to use the ‘living expense’ money to pay for housing and transportation while in Antigua or on rotations,” though it can’t be used for tuition at AUA, “as this violates federal student-loan regulations,” according to Plymouth’s website.
Maintaining Status
While the alliance ended in May, Plymouth, which has 7,300 students, still has AUA students enrolled, said Jennifer Pinckney, director of graduate business programs at Plymouth. AUA students make up about 350 of the 800 MBA candidates, and about 60 have completed the program since 2009, she said.
Students can maintain their status by taking one 10-week course at a time, and can take a term off. To receive continued aid, they must successfully complete “75 percent of all graduate credits attempted,” according to Plymouth’s website.
“We can make it work for individuals,” Pinckney said.
The intent of AUA’s partnership is to give its students a better shot at landing a residency in the U.S. and prepare them for the business side of practicing medicine, said Vikram Kaul, senior vice president and chief financial officer of the Americas unit of Manipal Global Education Services in Bangalore, India, which owns AUA.
‘Their Choice’
“We would never encourage someone to take on more debt for living expenses,” Kaul said in an interview. “I’m hoping that’s not the main reason” that students sign up for the MBA programs, he said. “We give them the facts and access to the schools. It’s their choice after that.”
Even if AUA is approved for U.S. student-loan access, it would maintain any partnerships already in place, Kaul said.
U.S. students who attend Caribbean medical schools that are approved for federal loans on average amass more debt than their counterparts back home.
Students at American University of the Caribbean in St. Maarten and Ross University School of Medicine in Dominica, owned by DeVry Education Group Inc. (DV:US), and St. George’s School of Medicine in Grenada, were disbursed about $470 million in U.S. government loans in the year ended June 2012. Saba University School of Medicine was approved for federal loan access in July.
The median federal loan debt of graduating students at St. George’s, Ross and AUC was at least $232,000 in the year ended June 2012, according to U.S. data. That compares with $170,000 for U.S. students, including their undergraduate debt, according to the American Association of Medical Colleges in Washington.
Attrition, Completion
Attrition at U.S. schools averaged 3 percent for the class that began in 2008, while 80 percent graduated in four years, according to the AAMC. Attrition was 20 percent to 27 percent at for-profit DeVry’s two schools, while 52 percent of Ross students and 66 percent at AUC completed their program on time in 2012, according to DeVry.
The Education Department’s Office of Inspector General has sought changes for more than a decade to rules on living expense borrowing for online programs. In testimony to Congress in March, Inspector General Kathleen Tighe recommended a change in the cost-of-attendance calculation, limiting room and board allowance and other costs that online education students don’t incur as a result of their studies.
“With the explosion of online education in recent years and the number of full-time working individuals that take these courses, a COA budget that includes an allowance for room and board for online learners may not be in the best interest of American taxpayers and may allow students to borrow more than is needed,” Tighe said in 2010 testimony.
More Partnerships
The Obama and Bush administrations and Congress haven’t closed the loophole for fear of being perceived as opposing technological progress, said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.
Congress already limits living expense money for veterans, their spouses or dependents in distance-learning programs, according to the Veterans Administration.
Davenport University in Grand Rapids, Michigan, has partnerships with several Caribbean schools, offering medical students tuition discounts if they enroll in Davenport’s online Health-Care MBA program.
Desmond Daley, who has finished the first two years at Medical University of the Americas on the island of Nevis, known as MUA, also enrolled in the Davenport program. He said he’s borrowed about $10,000 a semester for the MBA, and has used at least $4,000 for living expenses.
‘Pretty Hard’
“I don’t have any access to federal loans otherwise,” said Daley, who grew up in Fairfield, California. “It’s pretty hard to finance medical school.”
Davenport has alliances with at least two other Caribbean schools besides MUA that don’t have access to federal U.S. loans — St. Matthew’s University in the Cayman Islands and the University of Medicine and Health Sciences, or UMHS, on St. Kitts, according to the schools’ websites.
MUA and St. Matthew’s are owned by private equity firm Equinox Capital, through its R3 Education Inc. Steven Rodger, founder and managing partner of Greenwich, Connecticut-based Equinox, declined to discuss the schools. Equinox also owns Saba.
Davenport started the agreements with the medical schools in 2005, the university said in an e-mailed statement.
“Information pertaining to those students who choose to obtain loans related to their DU education is a personal matter and it is not appropriate for us to comment,” according to the statement.
‘Win-Win’
Caribbean Medical University in Curacao has a partnership with Walden University, a for-profit college based in Minneapolis. Walden also lists on its website associations with AUA, UMHS, Aureus University School of Medicine in Aruba, and International American University College of Medicine in St. Lucia. Tamara Chumley, a Walden spokeswoman, declined to comment, pointing to the school’s partnership page on its website.
Daley, the medical student, said his Davenport MBA will come in handy in the future.
“Eventually I want to open up my own practice,” he said. “This is a win-win for me.”
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PHOTO: St Matthew’s University Medical School Grand Cayman CREDIT: www.caribbeanpix.com
