For-Profit College Operator to Forgive $102.8 Million in Student Loans

Photo (cc) by yusunkwon

In the largest civil award to date in a for-profit college case, Education Management Corporation has agreed to pay $95.5 million to settle allegations of illegal recruiting and consumer fraud, among other violations.

The landmark settlement with EDMC, the second-largest for-profit college operator in the United States, is the result of a whistle-blower lawsuit that accused EDMC of using “high pressure boiler room” tactics to enroll students in college, regardless of their chances of college success, according to the Justice Department. College admissions workers were paid solely on the number of students they enrolled.

“Improper incentives to admissions recruiters result in harm to students and financial losses to the taxpayers,” Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said in a statement.

It’s estimated that EDMC collected more than $11 billion, more than 90 percent of it in the form of federal student aid, between 2003 and 2011 using its aggressive recruiting methods, according to The New York Times.

In a separate agreement with 39 state attorneys general and the District of Columbia over EDMC’s aggressive student recruiting practices, EDMC has agreed to forgive about $102.8 million in student loans to 80,000 former students, the Times reports.

The debt forgiveness program will affect students who were enrolled in an EDMC college, which operate as the Art Institute, Argosy University, Brown Mackie College and South University, between 2006 and 2014 for 45 days or fewer with less than 24 hours of credit transfer, according to EDMC. Eligible students will have an average of $1,370 in loans forgiven, the Times said.

“Now more than ever, a college degree is the best path to the middle class, but that path has to be safe for students,” U.S. Education Secretary Arne Duncan said in a statement. “This settlement should be a warning to other career colleges out there: We will not stand by while you profit illegally off of students and taxpayers. The federal government will continue to work tirelessly with state attorneys general to ensure that all colleges follow the law.”

Although EDMC has now resolved federal and state complaints, the for-profit college operator did not acknowledge any wrongdoing.

“Doing so would have meant that individual students would have had potential grounds to discharge their loans taken out to attend the colleges, potentially costing hundreds of millions of dollars,” the Times explained.

“Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students,” said EDMC President and CEO Mark McEachen.

EDMC is now required to disclose to prospective students how much money they may owe if they attend an EDMC college for four years, how many students complete the program they’re entering and how many get jobs after graduation.

Did you attend a for-profit college? What do you think of the settlement packages EDMC agreed to? Share your thoughts below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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