Education Corporation of America et al v. United States Department of Education et al

On November 5, 2018, Education Corporation of America and its affiliated for-profit colleges, including Brightwood College and Virginia College, filed suit in the U.S. District Court for the District of Columbia against the U.S. Department of Education and Secretary Betsy DeVos. The plaintiffs challenged the Department's sudden demand that they post a letter of credit covering 10% of their annual Title IV federal student aid funding, following the loss of recognition of their accreditor ACICS. They argued the action was arbitrary and capricious under the Administrative Procedure Act and would force immediate campus closures. The court denied a requested temporary restraining order, and shortly thereafter ECA ceased operations entirely, affecting thousands of students nationwide.

The United States District Court for the District of Columbia denied the plaintiffs' motion for a temporary restraining order, finding they failed to establish a likelihood of success on the merits or that irreparable harm was imminent. Following the denial, ECA announced the closure of all its campuses and subsequently filed for Chapter 7 bankruptcy.

Whether the Department of Education's requirement that the plaintiff institutions immediately post a substantial letter of credit to continue participating in federal student aid programs violated the Administrative Procedure Act by being arbitrary, capricious, and an abuse of discretion, and whether the plaintiffs demonstrated irreparable harm sufficient to warrant a temporary restraining order.

The abrupt closure displaced over 20,000 students and left faculty and staff without employment, intensifying the national debate over the federal oversight of for-profit colleges. The case highlighted the vulnerabilities created by the precarious accreditation system and influenced subsequent regulatory efforts to protect students from sudden institutional collapses tied to federal aid eligibility.