Former financial aid director says college for cognitively disabled violated federal student loan rules

The former financial aid director at a Racine County college for students with intellectual and developmental disabilities claims the school has been violating federal student loan rules to dramatically ramp up enrollment.

In a federal lawsuit, Jacqueline Niccolai says Shepherds College fired her after just four months in retaliation for raising concerns about what she calls fraud against the U.S. Department of Education. 

One of Niccolai's attorneys, Nola Hitchcock Cross, said the college should have heeded Niccolai's warnings, not fire her.

"Such conduct is intended to and does deter other whistleblowers," Hitchcock Cross said in a statement. "For this reason, the damages for discharging whistleblowers under the False Claims Act are among the strongest of any statute covering retaliation against employees."

The suit seeks double her back pay with interest, along with other lost earnings and special damages for discrimination.

The school's director, Tracy Terrill, declined to discuss the lawsuit's claims.

Shepherds College, in Union Grove, is a three-year Christian college for young adults with intellectual and developmental disabilities (IDD). It costs about $46,000 a year to attend, including room and board. 

It offers programs in technology, culinary arts and horticulture. Students study in their chosen field for two years and spend a third getting on-the-job experience with related businesses. Students also learn life skills such as finding a job and apartment and budgeting money, all aimed at preparing them for more independent living, according to the school's website.

Many of its approximately 80 students, recruited nationwide, get federally-backed loans.

"As the country’s only fully-accredited, post-secondary program for students with IDD, Shepherds is in a unique position to offer government grants, loans and federal work study to its students," its website states.

Niccolai was hired as the financial aid director in January 2018 and fired in May. According to her lawsuit, she immediately saw problems in how the college was handling federal student loans and tried to correct them but was ignored, discouraged or blocked.

She observed "widespread, systematic, intentional ... compliance failures and corresponding record falsification" regarding students' eligibility for loans, documentation of their academic progress and the school's claims about employment prospects and loans, according to the suit.

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Admissions staff were not making sure that students understood the obligations they incurred by signing for federal student loans, the suit said, and told parents to just forge their adult children's signatures. She said she realized that many of the students could wind up with large loans and little chance of finding the type of employment that would support repayment. The culinary certificate, for example, can help graduates get jobs as dishwashers, servers or cafeteria workers.

When Niccolai pointed out the problem, she was told "they wouldn't understand it" and that impacts of unpaid loans on the students' future credit didn't matter because "they lived with their parents."

She claims one parent told her she was encouraged to take the largest loans possible because they would automatically be forgiven because of the students' intellectual disabilities, which Niccolai said is not true.

Some federal student loans can be forgiven if students are totally and permanently disabled and qualification for Supplemental Security Income (SSI) or Social Security Disability Income (SSDI) can be a factor in that determination. Some people with intellectual disabilities do qualify for such benefits.

Niccolai said she told Terrill, the college's president, that the loans were being misrepresented to potential students by the recruitment director and that he acknowledged he was aware of the practice.

The director, Brian Canright, was promoted to vice president of expansion in 2018 after signing up the school's largest entering class of 28, according to the suit. Canright did not return messages.

Though she was the director of financial aid, Niccolai says her bosses denied her access to Shepherds College's account for the federal database for student aid to make sure students were eligible for loans and was told she should not attend a presentation by Canright to potential students about financial aid.

Further, she claims, she eventually found some students had only partial, or in some cases forged, records in their admissions files.

When Niccolai suggested Shepherds College should recertify as a program specifically for disabled students, she claims, Terrill said that would make the school eligible for less federal money and dismissed the idea.

Niccolai disputes the college's claim that 90% of its graduates are gainfully employed.

Her suit says she was fired after she prepared a U.S. Department of Education checklist of loan-related information for graduating students and Terrill learned about it after a parent faxed the checklist back to the college.

She knew the Department of Education was conducting an audit of the school for its recertification review and she was trying to get the school's records and procedures in order. She was fired before she knew the outcome of that audit.

Department of Education officials could not be reached.

Contact Bruce Vielmetti at (414) 224-2187 or bvielmetti@jrn.com. Follow him on Twitter at @ProofHearsay.