A $95.5 Million Settlement In For-Profit College Case
Education Management Corporation will pay $95.5 million to settle allegations that it lied about its recruiting practices. The sum, announced Monday by U.S. Attorney General Loretta Lynch and Education Secretary Arne Duncan, is the largest civil award to date in a case involving a for-profit college.
"Simply put," Duncan said, "EDMC wasn't interested in playing by the rules."
More than 90 percent of the company's revenues, Lynch noted, come from taxpayers in the form of federal education funding for students. The college collected nearly a billion dollars in federal aid just last year.
Two former employees originally came forward to accuse the company of illegally paying recruiters for each student enrolled, leading to "boiler room"-style pressure tactics to get the numbers up. In her statement today, Lynch praised the "brave actions" of the whistleblowers.
As part of a consent decree with the company, 39 states and the District of Columbia agreed to end their investigations into its recruiting and marketing.
EDMC said in a statement that "though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students."
The company said it is putting new procedures in place that will promote "transparency to students while continuing to provide high-quality education."
EDMC is not a marginal player in this world. The company was once the second-largest provider of for-profit higher ed in the country, with the Art Institutes being its best-known brand.
Even after years of bad press and a plunging stock price, the company still enrolls nearly 100,000 students.
The consent decree with state officials covers marketing, recruitment and disclosure. The states seek to curb practices such as enrolling students in programs to become K-12 teachers while leaving those students ineligible for a license in their state because the program included no student teaching.
The settlement also includes provision for forgiveness of about $103 million in loans, limited to students who left the colleges within 45 days of enrollment.
The Department of Education, Duncan said today, would be "open for business" on future claims from current and former students.
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