Agreement with for-profit education company addresses consumer complaints

 and investigation by state attorneys general

HARTFORD, CT- Attorney General George Jepsen and state Department of Consumer Protection Commissioner Jonathan A. Harris today announced that Connecticut has joined with 38 other states and the District of Columbia in a national settlement with the Education Management Corporation (EDMC), an operator of for-profit post-secondary educational institutions. The settlement significantly reforms recruiting and enrollment practices, and forgives more than $102.8 million in outstanding loan debt held by more than 80,000 former students.

EDMC, based in Pittsburgh, Pennsylvania, operates 110 schools in 32 states , under various names including Argosy University, The Art Institutes, Brown Mackie College and South University.

The agreement with attorneys general in 39 states plus the District of Columbia 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.

“Students in Connecticut and across the country are coping with high student loan debts that they incurred after aggressive sales tactics and deceptive marketing practices that exploited their hopes and dreams of achieving a quality education,” said Attorney General Jepsen. “This settlement will help to ensure that EDMC makes substantial changes to its business practices for future students while also providing debt relief to thousands of students who need and deserve it."

“Deceptive student recruitment practices harm our students and threaten their future economic, artistic and cultural success," said Commissioner Harris.  "I am proud of our collaboration with the Attorney General’s office that has achieved loan forgiveness for the students who were misled by EDMC. This is an important first step in holding for-profit schools accountable.”

The agreement will put in place a significant interactive online financial disclosure tool required for all prospective students who utilize federal student aid or loans. The 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.

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.

• 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.

• 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.

• 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.

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.

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.  Connecticut helped lead the investigation and will be a member of the six-state executive committee that will have continuing responsibility to enforce the agreement.

EDMC has 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.

Assistant Attorneys General Joseph Chambers and Robert Clark are assisting the Attorney General with this matter.

Please click here to view the settlement.

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