Stone Academy Settles Fraudulent Student Loan Payment Claims: Feds

WEST HAVEN, CT — For-profit career school Stone Academy has settled for $1 million over allegations that it lowered its alumni student loan default rate by sending payments to loan companies on behalf of its students, the Connecticut district attorney's office announced.

The school and its owner, Mark Scheinberg, were accused of mailing 154 small, direct payments to loan companies on behalf of 102 students between February 2015 and March 2019 to try to prevent those students from defaulting on their loans, the district attorney's office said.

Doing so would have influenced Stone Academy's "cohort default rate" (CDR) — the percentage of an institution's federal student loan borrowers who failed to make payments on their loans.

"The cohort default rate is an important metric that students can use to research whether a school provides a valuable education because it can show whether the degree they would earn will help them find employment that allows them to stay current on their student loans," U.S. Attorney Vanessa Avery said in a statement. "Educational institutions — especially private, for-profit schools — that attempt to hide high student loan default rates from the Education Department and their students not only risk forfeiting their and their students' eligibility to receive federal funds, but they risk federal enforcement by our office and our investigative agency partners."

According to the district attorney's office, Scheinberg purchased and filled out money orders to make the payments without students' knowledge or consent, and they were done in a way that was meant to conceal the fact that himself and the school were making them.

"Stone Academy then failed to disclose to the Department of Education its actual, higher CDR reflecting the deemed default of numerous borrowers given Scheinberg's concealed payments," the district attorney's office said in a statement.

In addition to the $1,023,950 (plus interest) payment, under the agreement Stone Academy and Scheinberg made with the Department of Education Scheinberg must divest from — and end his involvement and participation in — the operations of Stone Academy and Paier College of Art (another for-profit school).

"Today's settlement is a result of the work and effort of the Office of Inspector General and the Department of Justice to protect and maintain the integrity of federal student aid programs," said Terry Harris, Special Agent in Charge of the U.S. Department of Education Office of Inspector General's Eastern Regional Office. "We will continue to work together to ensure that federal student aid funds are used as required by law."

In addition to its West Haven campus, Stone Academy has campuses in Waterbury and East Hartford that award career diplomas in various medical fields.