Rutledge: For-Profit Higher Education Company to Change Practices, Forgive Loans
November 16, 2015
LITTLE ROCK – Arkansas Attorney General Leslie Rutledge today announced that a for-profit higher education company, Education Management Corp. (EDMC), will significantly reform its recruiting and enrollment practices, and forgive more than $703,000 in student loans for approximately 800 former college students in Arkansas, through an agreement with Rutledge and a group of State attorneys general.
“Education Management Corp. used unfair and deceptive enrollment practices in providing loans to Arkansas students, said Attorney General Rutledge. “These loans, backed by Arkansas taxpayers, were destined to fail. I am pleased this agreement provides needed relief to a large number of former students in Arkansas who have been affected, and it requires Education Management Corp. to make numerous changes to protect future students.”
The agreement with attorneys general in 39 States plus the District of Columbia, through a consent judgment to be filed in Pulaski County Circuit Court, mandates added disclosures to students, including a new 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.
EDMC, based in Pittsburgh, Pennsylvania, operates 110 schools in 32 States and Canada through four education systems, Argosy University, The Art Institutes, Brown Mackie College and South University.
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.
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to outstanding EDMC institutional loans must have been enrolled in an EDMC program with fewer than 24 transfer credits; withdrawn within 45 days of the first day of their first term; and their final day of attendance must have been between Jan. 1, 2006 and Dec. 31, 2014.
The agreement is expected to provide an average of $1,370 per person in loan forgiveness.
The agreement will also put in place a significant online financial disclosure tool required for all prospective students who utilize federal student aid or loans. The impending system, called the Electronic Financial Impact Platform (EFIP), is currently under the final stages of development by the U.S. Consumer Financial Protection Bureau 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.
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 via the 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.
- Be honest with prospective students regarding EDMC’s accreditation for positions that require state licenses.
- 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.
After receiving numerous complaints from current and former EDMC students, State attorneys general initiated a multistate investigation in January 2014. Attorneys and investigators reviewed consumer complaints, reviewed company documents and interviewed former EDMC employees.
Today, EDMC also agrees 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.