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333 South Kansas Street Edwardsville IL 62025 Phone: 618-656-2593 Fax: 618-656-2594 Email: alvareita65@yahoo.com Website:

333 South Kansas Street Edwardsville IL 62025

Phone: 618-656-2593 Fax: 618-656-2594 Email: alvareita65@yahoo.com Website: http://www.alvareita.com

August 16, 2016

For Immediate Release.

Edwardsville, Illinois, August 16, 2016. The management of Alvareita’s College of Cosmetology (“Alvareita’s”), a two-generation, family-owned beauty school, which for several decades has operated three campuses in Southern Illinois in Belleville, Edwardsville and Godfrey, announces that it is challenging actions taken by the U.S. Department of Education (“ED”) over the past 18 months that are threatening to drive the Alvareita’s schools out of business.

Alvareita’s was founded, owned and managed by businesswoman Alvareita Giles, with various family members helping to run the business, including her daughter Sheila Fudge serving as director of the Belleville campus and her cousin Judith Grigg serving as director of the Godfrey campus. Ms. Giles passed away suddenly on August 4, 2013, but her family members have continued to operate the Alvareita’s schools since that time. Ms. Giles’ company stock has been held in a family trust, over which Ms. Fudge has been serving as successor trustee. Ms. Giles intention, set out in the trust, was for her stock to be distributed among her family members, but a legal battle with the ED has prevented that from happening to date.

Within a couple of weeks of Ms. Giles’ death, Ms. Fudge placed phone calls to the Private Business & Vocational Schools Division of the Illinois Board of Higher Education (the “Illinois Board”), the schools’ accrediting body, the National Accrediting Commission for Career Arts & Sciences (the “NACCAS”), and the ED, to inform them of her mother’s death. Since Ms. Giles’ shares remained in trust to be passed on eventually to her family members, Ms. Fudge and other family members thought this was all they needed to do. Unfortunately, the government regulators saw it differently but did not share that opinion until more than a year had passed.

Despite Ms. Fudge’s phone calls, more than a year later both the NACCAS and the ED informed Alvareita’s that it should have made a formal report within weeks of Ms. Giles’ death. NACCAS imposed a $57,000 fine on the schools and made them apply for renewal of their accreditation with proof that the Illinois Board had approved the schools operating with Ms. Giles’ family members running operations – all of which was done to the satisfaction of NACCAS.

The ED’s position was far worse and more punitive in nature – in early 2015 the ED cut off the schools’ access to federal student loans and grants, needed by over 80% of the schools’ students to pay tuition, and announced that the schools would not regain loans and grants unless they repaid all aid funds disbursed to students after Ms. Giles’ death, an amount which the ED indicated it would eventually determine. Given that most students need federal aid, the schools stopped enrolling new students. But to allow existing students to finish their programs, the schools continued to operate with a leaner staff and with family members sacrificing compensation and contributing around $250,000 of personal savings to pay operating expenses.

This spring the ED announced that the schools must repay over $650,000 and until they do so they will not be able to apply to have federal aid restored. Yesterday, Alvareitas filed a brief in an administrative appeal which demonstrates that the government’s actions are contrary to federal laws and regulations and asks an Administrative Law Judge to overturn the ED’s actions and require it to restore federal student aid to the schools. Given the typical time involved in an appeal process of this nature, there may not be any ruling until the holiday season has arrived.

The Alvareita’s schools have a strong track record of both serving students aspiring to beauty careers and complying with regulatory standards. Over the past several years, on average more than 60% of the schools’ students have completed their programs, over 90% of the graduates have passed their licensing exams and over 50% of these licensed professionals have obtained jobs in the beauty industry. Even more impressive are the schools’ loan default rates – the rate at which graduates and withdrawn students meet their loan obligations over a three year period. Over the past 3 years, the official default rates for the Alvareita’s schools have ranged between 6.2% and 15.1%, which means an overwhelming majority of the schools’ students are completing their education, getting jobs and paying back their loans outcomes which the federal government has said define a quality educational institution.

But this high quality family owned institution that has prepared hundreds of students for beauty careers may not be around much longer. Already Alvareita’s has found it necessary to close its Belleville campus, and the two other campuses are clinging to a day to day existence with only a handful of students. Ms. Giles’ family members and other remaining staff at the schools remain hopeful that justice will prevail in their appeal and gravely flawed actions of the ED will soon be overturned.

For more information, contact Sheila Fudge at (618) 656-2593 or alvareita65@yahoo.com or the schools’ attorney Ron Holt at (816) 292-7600 or rholt@dfrglaw.com.