A Pennsylvania company that enrolls more than 100,000 students at for-profit trade schools and colleges across the U.S. and Canada will pay $95.5 million to settle claims it illegally paid recruiters and exaggerated the career-placement abilities of its schools.
Education Management Corp. (EDMC), under the deal announced by the Justice Department on Monday, also agreed to forgive $102.8 million in loans it made to more than 80,000 former students.
The company runs 110 schools in 32 states and Canada for chefs, artists and other trades, including The Art Institutes, Argosy University, Brown Mackie College and South University. Under the settlement, it didn't acknowledge wrongdoing but said it has "worked with state attorneys general to develop new, more transparent recruiting and disclosure standards."
The case began in 2007 when a recruiter and the EDMC employee who trained her filed a whistleblower lawsuit in federal court in Pittsburgh.
That lawsuit, and others like it, claimed the company signed up students it knew likely wouldn't succeed or finish its programs. It did so by paying recruiters using illegal enrollment-based incentives in hopes of raking in government financial aid, which provided the bulk of the company's income, the lawsuit said.
Eventually, the Justice Department, 12 states and the District of Columbia intervened and, initially, sought to have Education Management forfeit more than $11 billion it received in federal and state student aid since 2003.
The schools will give students "easy-to-read, single-page" disclosure statements outlining graduate placement rates and financial costs. Students also will be able to withdraw, tuition-free, within seven days of enrolling in a bricks-and-mortar schools and 21 days from online programs.
The loan forgiveness applies to students that left EDMC schools within 45 days of enrolling from 2006 through 2014.
The company said it still believes the allegations were without merit, but it wanted put "these matters behind us" and return its focus to educating students.
"This case not only highlights the abuses in EDMC's recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution's deceptive practices," U.S. Attorney General Loretta Lynch said at a news conference.
States participating in the settlement agreement with EDMC and its subsidiary schools include: 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 as well as the District of Columbia.