Bad Loans Close Business College : Education: Defaults on student loans prompt withdrawal of federally guaranteed financial aid.

The United College of Business has closed its campuses in Hollywood, Downey and Pico Rivera because of financial problems that will force it into bankruptcy, officials said earlier this week.

The business school, which had about 1,000 students at the three sites, was closed last week after a state agency barred it from teaching students who receive federally guaranteed loans.

The California Student Aid Commission took that action because the college has had too many defaults on student loans, commission spokesman Dan Parker said. The defaulted loans have totaled about $10 million in the last 10 years, Parker said.

College President Alan D. Mentzer wrote in a memo to faculty and students that the action would deprive the school of money it desperately needs to survive.

“Unfortunately, we do not have the financial resources at the present time to stay open without this tuition,” Mentzer said.

Faculty and students said they were caught off-guard last week by memos informing them that the college would be closed after offering computer, secretarial and other business-related classes for the last 21 years.

Mentzer, who could not be reached for comment, advised faculty members that they would not receive their paychecks for work performed since Aug. 16 until arrangements could be made through U.S. Bankruptcy Court. Students were advised to call the state Department of Education for help in finding other schools to continue their education.

“We have been teaching free since Aug. 16, unbeknown to us,” said Larry Halford, who taught English as a second language at the college’s Hollywood campus. “There was no indication that there was not a viable business there. They were even remodeling classrooms.”

The state Department of Education is overseeing the closure to ensure that students will be able to continue their studies at other business colleges or recover their tuition, said Roy Steeves, assistant director of private post-secondary education.

Tuition ranged from $6,000 to $12,000 for a complete business course, Steeves said.

Steeves said state education officials need to review college records to determine how many students are affected.

Mentzer told state officials that the college would declare bankruptcy and begin liquidating its assets, Steeves said.

As of last January, federal law has required that action be taken against schools that have had many students default on government-guaranteed loans.

Parker of the California Student Aid Commission, which administers about 90% of the federally guaranteed student loans in the state, said the United College of Business was declared ineligible to serve students with Supplemental Loans for Students. The interest rate for those loans is 11.49%.

The default rate for the college was 58.3% in 1987, the last year for which such figures are available, a federal education official said.