U.S. for-profit college to pay record $95.5 mln settlement (updated)

Education Management

16/11/2015 19:26

(Recasts throughout with confirmation, details, reaction) 
    By Andy Sullivan 
    WASHINGTON, Nov 16 (Reuters) - Education Management Corp 
 EDMC.PK , the country's second-largest operator of for-profit 
colleges, said on Monday it has agreed to pay a record $95.5 
million to resolve charges that it used high-pressure sales 
tactics to mislead students, in violation of U.S. law. 
     The settlement is the latest blow for the for-profit 
education industry, which has suffered from declining enrollment 
and increased government scrutiny under President Barack Obama. 
    At a press conference in Washington, Obama administration 
officials said the company signed up as many students as 
possible to tap billions of dollars in federal student aid but 
had little interest in whether they completed a degree or found 
work after graduating. 
    "Instead of caring whether students would be successful, the 
company only cared about revenue," Education Secretary Arne 
Duncan said. 
    U.S. Attorney General Loretta Lynch said the company paid 
its recruiters based only on how many students they enrolled, a 
violation of federal law. Student aid accounted for nine out of 
every 10 dollars in tuition revenue, officials said. 
    The settlement also covered consumer-fraud investigations in 
39 states and the District of Columbia.  
    Pittsburgh-based Education Management enrolls more than 
100,000 students through online courses and 32 brick-and-mortar 
campuses as the Art Institutes, Argosy University, Brown-Mackie 
College and South University.  
    The company did not admit fault under the settlement but 
agreed to allow the government to monitor its admissions and 
forgive the debts of some former students.  
    It also agreed to give prospective students a one-page form 
on facts such as employment prospects and average debt for those 
who have signed up. Students will be able to get a refund if 
they drop out shortly after enrolling. 
    "Though we continue to believe the allegations in the cases 
were without merit, putting these matters behind us returns our 
focus to educating students," company President Mark McEachen 
said in a prepared statement. 
    The figure, the largest false-claims settlement ever reached 
with a for-profit college, is a fraction of the $11 billion 
Education Management collected in federal student aid since 
2003. 
    That settlement reflects the company's financial condition 
and ability to pay, Lynch said. Its stock price has fallen from 
$28.66 in December 2011 to 7 cents before the agreement was 
unveiled, and it announced a debt restructuring in April. 
    Rivals have stumbled as well. Corinthian Colleges closed its 
doors and filed for bankruptcy earlier this year after facing  
state and federal probes about whether it misled investors and 
students. 
 
 (Reporting by Andy Sullivan; Editing by Kevin Drawbaugh, 
Jonathan Oatis and Steve Orlofsky) 
 ((andy.sullivan@thomsonreuters.com; +1 202 354 5864; Reuters 
Messaging: andy.sullivan.thomsonreuters.com@reuters.net)) 
 
Keywords: USA EDUCATION/EDUCATIONMANAGEMENT