FORT WAYNE, Ind. (WANE) The former head of Masters of Cosmetology admitted Thursday in federal court to running a student loan scheme at the beauty school that secured nearly $3 million in bad student loans.
Kaydean Geist, the owner and president of Masters of Cosmetology at 1732 Bluffton Road, pleaded guilty in U.S. District Court in Fort Wayne to allegations that she did not repay student financial aid funds in the millions of dollars she helped students secure illegitimately between April 2009 and August 2010.
Federal law prohibits students enrolled in programs like those as Masters of Cosmetology from obtaining more than $30,000 in student loans, or obtaining Federal Family Education loans and direct loans concurrently.
The charges allege that Geist and the school, though, “fraudulently schemed to obtain (United States Department of Education) loan funds to which (the school) and its students were not entitled, by using elaborate false statements to conceal from ED, and the students themselves, the fact that Defendant College and its students were receiving loan funds far in excess of their eligibility.” According to the charges, Geist would code the receipt of the federal loan proceeds as cash rather than as federal financial aid funds, then not report them to the college’s third-party student aid processing contractor.
The scheme allowed the school to apply for both Federal Family Education loans and direct loans for the same students for the same academic period, the charges alleged.
From there, Geist would have the students sign promissory notes for the loans without showing them the details of their debts, the charges alleged. She also told students they were being awarded with false loans, the charges alleged.
Investigators said Geist and the school “knowingly and falsely told students that the loans were under a new government program that required only minimal payments and did not need to be repaid in full.”
Geist also granted students sham loans from the school for their personal expenses that were actually federal loans, and forged more than 150 Family Education loan checks for more than $500,000 that was deposited into the school’s account.
All told, more than 50 Masters of Cosmetology students received between $30,000 and $98,000 in loans, and Geist and the school helped secure some $2.9 million in bad student loans, the charges alleged.
As part of the plea with federal prosecutors, Geist was ordered to pay $300,000 in restitution to the government.
Masters of Cosmetology is now closed. A letter posted on a door of the Bluffton Road school from Geist herself details she has been “forced to close our school” because she was “responsible for the mishandling of federal financial aid funds by a former financial aid director.” Therefore, the letter reads, “all government aid has been halted, making it impossible for me to keep the school open.”
“These past several years have been very stressful and emotional for me, my family and my staff as we worked very hard to provide the education our students entrusted to us without the assistance of federal funds along with the cost of legal counsel,” the letter reads.
Geist is facing up to five years in prison and a five of up to $250,000. It’s not clear yet when Geist will be sentenced.