Former Pa. students of for-profit education company to receive more than $4 million in loan relief
Attorney General Kathleen G. Kane has announced a settlement with a for-profit education company accused of using high-pressured recruitment practices and misrepresenting the number of its graduates who obtained employment in their field of study.
Under the terms of the settlement, Education Management Corporation (EDMC) will forgive more than $4 million in loans to approximately 2,683 of its former Pennsylvania students. The agreement is expected to provide an average of $1,370 in loan forgiveness to each of these students.
Nationwide, the settlement requires EDMC, which is based in Pittsburgh, to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students. The settlement was joined by 39 other state Attorneys General.
The settlement, which was reached in the form of a consent judgment, also calls for EDMC to significantly reform its recruiting and enrollment practices. It bars the company from making misrepresentations to prospective students. Moreover, the settlement calls for an extended period in which students may withdraw with no financial obligation.
EDMC operates 110 schools in 32 states and Canada through four education systems, including Argosy University of California, The Art Institutes, Brown Mackie College and South University. Pennsylvania schools currently operated by the company include The Art Institute of Philadelphia and The Art Institute of Pittsburgh. The Art Institute of York stopped accepting new students earlier this year and is concluding instruction to existing students.
The settlement agreement is subject to court approval and was filed in Commonwealth Court by the Office of Attorney General's Bureau of Consumer Protection. The Bureau served on an executive committee of states that negotiated the settlement.
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 Jan. 1, 2006 and Dec. 31, 2014.
Interactive Financial Disclosure Tool
The settlement will also put in place an interactive online financial disclosure tool required for all prospective students who utilize federal student aid or loans. The impending 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.
Separate Resolution of Federal False Claims Lawsuit
EDMC also agreed to pay a $95 million settlement of a previous federal lawsuit under the False Claims Act in which the U.S. Department of Justice, on behalf of the Department of Education, alleged that EDMC illegally paid incentive-based compensation to its admissions recruiters tied to the number of students they recruited.
Consumers
Consumers with questions on the settlement, or who would like to file a complaint may do so online at www.attorneygeneral.gov, by phone at 1-800-441-2555 or by email at consumers@attorneygeneral.gov.