$10.6 million in Ohio student loans to be forgiven as part of multistate settlement

Ohio Attorney General Mike DeWine along with 39 other attorneys general have announced that the company behind Brown Mackie College, The Art Institutes, South University, Argosy University, and Stautzenberger College has agreed to reform its recruiting and enrollment practices and forgive about $102.8 million in student loans nationwide, including over $10.6 million in Ohio.

Under the multistate agreement, Education Management Corporation (EDMC) will stop collecting on the accounts of an estimated 80,795 former students, including over 7,100 from Ohio.

“We found that many students didn’t understand what they were getting into and accrued a significant amount of debt without ever getting a degree,” Attorney General DeWine said. “This settlement will provide relief for former students and protection for future students.”

In the settlement, EDMC agrees to provide greater disclosures to prospective students and to give students more opportunities to withdraw without incurring costs.

EDMC, which is based in Pittsburgh, operates 110 schools in 32 states and Canada through its education systems.

The attorneys general launched an investigation into the company after students complained about its recruiting and enrollment practices.

The settlement outlines several changes EDMC must make, including the following.

Disclosures:

• EDMC must provide a single-page disclosure to each prospective student outlining the student’s anticipated total cost, the median debt and earnings for those who complete the program, and the job placement rate, among other information.
• EDMC must reform its job placement rate calculations to provide more accurate information about students’ likelihood of obtaining employment in their chosen field.
• Prospective students who use federal student loans or financial aid will be required to utilize an Electronic Financial Impact Platform to provide a picture of the student’s expected education program costs, debt burden, and post-graduate income.

Prohibited misrepresentations: 

• EDMC must not make misleading statements about accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits, or licensure requirements.
• EDMC is prohibited from knowingly enrolling students in programs not accredited by the state if such accreditation is typically required for employment.

Recruiting practices:

• EDMC is prohibited from engaging in deceptive or abusive recruiting practices.
• It also is required to record online chats and telephone calls with prospective students.

Orientation and refund provisions:

• EDMC must require incoming undergraduate students with fewer than 24 credits to complete an orientation program prior to their first class.
• Undergraduate students at ground campuses must be permitted to withdraw within seven days of the beginning of the term or the first day of class (whichever is later) without incurring any cost.
• Undergraduate students in online programs who have fewer than 24 online credits must be permitted to withdraw within 21 days of the beginning of the term without incurring costs.

Third-party vendor requirements:

• EDMC must require its lead vendors (companies that place online ads urging consumers to consider new educational or career opportunities) to agree to certain compliance standards, such as not representing loans as “free money” and not sharing students’ information without their permission.

EDMC will send letters to the former students whose debt will be forgiven under the terms of the settlement. These former students had fewer than 24 hours of transfer credit, withdrew within 45 days of their first term, and last attended between 2006 and 2014. A list of the number of expected affected former students by state is available on the Ohio Attorney General’s website.

EDMC’s compliance with the settlement will be monitored independently for three years by Thomas Perrelli, former U.S. Associate Attorney General, who will issue annual reports.

Participating in the settlement are the attorneys general of Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming, and the District of Columbia.

In Ohio, a consent judgment is being presented to the Franklin County Common Pleas Court.

In addition to the state case, EDMC also agreed to pay $95 million to settle 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 recruited.