For-profit education company Education Management Corporation (EDMC) will significantly reform its recruiting and enrollment practices and forgive more than $2.29 million in loans for approximately 2,000 former students in Virginia through an agreement with Attorney General Mark R. Herring and a group of state attorneys general. Nationwide, the agreement requires the for-profit college company to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students.“Virginia students are entitled to rely on accurate, complete information when deciding whether a school is right for them. That includes a realistic explanation of the costs and likely benefits from the program they’re considering,” said Attorney General Herring. “EDMC’s practices were unfair to Virginia students and to taxpayers who backed many of the federal student loans that were destined to fail. This is a strong agreement that gives thousands of Virginia students millions in financial relief, and it helps ensure that the company will make substantial reforms to its business practices for future students.”
EDMC, based in Pittsburgh, Pennsylvania, operates 110 schools in 32 states and Canada through four education systems, including Argosy University, The Art Institutes, Brown Mackie College and South University, offering programs both online and at branch campuses in cities including Richmond, Virginia Beach, and Arlington.
In addition to financial compensation for students, the agreement with attorneys general in 39 states plus the District of Columbia, through a Consent Judgment filed in the Circuit Court for Henrico County, mandates added disclosures to students, including a new interactive online financial disclosure tool; bars misrepresentations to prospective students; prohibits enrollment in unaccredited programs; and institutes an extended period when new students can withdraw with no financial obligation.
Thomas Perrelli, former U.S. Associate Attorney General, will independently monitor the company’s settlement compliance for three years and issue annual reports.
Interactive Financial Disclosure Tool
The agreement will put in place a significant interactive online financial disclosure tool required for all prospective students who use federal student aid or loans. The online system, called the Electronic Financial Impact Platform (EFIP), is currently under the final stages of development by the U.S. Consumer Financial Protection Bureau (CFPB) and state attorneys general.
Based on a prospective student’s individual data, EFIP will produce a detailed financial report that includes the student’s projected financial commitment, living expenses and potential future earnings.
Consumer Complaints, Multistate Investigation
After receiving numerous complaints from current and former EDMC students, state attorneys general initiated a multistate investigation in January of last year. Attorneys and investigators reviewed consumer complaints, reviewed company documents, and interviewed former EDMC employees.
“Our investigation produced a pretty clear picture of how EDMC recruited prospective students into its programs and how many of those students left the program with tremendous debt and unfulfilled promises,” Attorney General Herring said. “My colleagues and I think this agreement addresses some of our biggest concerns about the company’s business practices and puts in place important new transparency and accountability measures.”
As part of the agreement, EDMC does not admit to the conduct alleged by attorneys general.
Agreement Highlights
Under the agreement, EDMC must:
- Not make misrepresentations concerning accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits, and licensure requirements. EDMC shall not engage in deceptive or abusive recruiting practices and shall record online chats and telephone calls with prospective students.
- Provide a single-page disclosure to each prospective student that includes the student’s anticipated total cost, median debt for those who complete the program, the default rate for those enrolled in the same program, warning about the unlikelihood that credits from some EDMC schools will transfer to other institutions, the median earnings for those who complete the program, and the job placement rate.
- Require every prospective student utilizing federal student loans or financial aid to submit information to the interactive Electronic Financial Impact Platform (EFIP) in order to obtain a personalized picture of the student’s projected education program costs, estimated debt burden and expected post-graduate income.
- Reform its job placement rate calculations and disclosures to provide more accurate information about students’ likelihood of obtaining sustainable employment in their chosen career.
- Not enroll students in programs that do not lead to state licensure when required for employment or that, due to lack of accreditation, will not prepare graduates for jobs in their field.
- Require incoming undergraduate students with fewer than 24 credits to complete an orientation program prior to their first class.
- Permit incoming undergraduate students at ground campuses to withdraw within seven days of the beginning of the term or first day of class (whichever is later) without incurring any cost.
- Permit incoming undergraduate students in online programs with fewer than 24 online credits to withdraw within 21 days of the beginning of the term without incurring any cost.
- Require that its lead vendors, which are companies that place website or pop-up ads urging consumers to consider new educational or career opportunities, agree to certain compliance standards. Lead vendors shall be prohibited from making misrepresentations about federal financing, including describing loans as grants or “free money;” sharing student information without their consent; or implying that educational opportunities are, in fact, employment opportunities.
Relief Eligibility
Those who will receive automatic relief related to outstanding EDMC institutional loans must have been enrolled in an EDMC program with fewer than 24 transfer credits; withdrew within 45 days of the first day of their first term; and their final day of attendance must have been between January 1, 2006 and December 31, 2014.
Separate Resolution of Federal False Claims Lawsuit
Today, EDMC also agreed to pay a $95 million settlement of a separate federal whistleblower lawsuit under the False Claims Act. In that case, brought by the U.S. Department of Justice on behalf of the Department of Education, the government alleged that EDMC illegally paid incentive-based compensation to its admissions recruiters tied to the number of students they recruit.
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