Education

Schneiderman Strikes Again: For-Profit College Chain Must Forgive $102 Million In Student Loans

CREDIT: Mike Groll, AP

New York Attorney General Eric Schneiderman attends the State of the Judiciary at the Court of Appeals on Tuesday, Feb. 17, 2015, in Albany, N.Y.

A major for-profit college company reached a settlement with more than three dozen state attorneys general on Monday, and will now be required to forgive more than $102.8 million in outstanding loan debt held by more than 80,000 former students across the country.

Education Management Corporation, or EDMC, reached the settlement with the New York Attorney General Eric Scheiderman’s office, along with 38 other state attorneys general, including the District of Columbia. Schneiderman alleged that EDMC — which owns the Art Institutes, Argosy University, and Brown Mackie College — used “high-pressure” recruitment tactics, misrepresented the educational benefits the colleges offer, gave inaccurate information about some of their programs’ accreditation, and misrepresented job placement rates and graduation rates. Back in May, EDMC announced it would gradually shut down 15 of 52 campuses of The Art Institutes.

“EDMC preyed on the hopes and dreams of New York students, and ripped off taxpayers, who backed federal student loans that were destined to fail,” Schneiderman said in a statement.

As part of the settlement, EDMC does not have to admit to the conduct alleged by attorneys general. Under the consent judgment, the schools will be mandated to add certain disclosures, provide a longer period of time for students to withdraw without financial obligation. Students will no longer be allowed to enroll in unaccredited programs.

It’s especially important for students to be able to withdraw without financial obligations. As Art Institute graduates told ThinkProgress, they would have withdrawn much sooner if not for financial responsibilities, because they realized they were receiving a poor quality of education after only one or two semesters there.

Graduates of the Art Institutes continue to organize to raise awareness for loan forgiveness and warn prospective students to stay away from EDMC colleges. The agreement does not allow for automatic relief for all students, since students have to meet certain criteria, such as dates of attendance and the number of transfer credits they have. Students must have attended between January 1, 2006 and December 31, 2014, been enrolled in a program with fewer than 24 transfer credits, and withdrawn within 45 days of the first day of their first semester or term at the school.

Sanders Fabares, a graduate of The Art Institute of San Diego, spoke at a public hearing on defense to repayment options in San Francisco held by the U.S. Department of Education. The department chose a “special master” to create a special process for defense to repayment.

The special master, Joseph Smith, who has experience with mortgage settlement claims, released a progress report every few months. During the last progress report, which was released to the public in September, Smith was asked about whether the department would consider for-profit college graduates besides those who attended for-profit colleges under the Corinthian College Chain, but at that point, he said the team hadn’t yet considered how other for-profit college graduates would factor into the debt forgiveness plan.

Arne Duncan made remarks at a press conference Monday shortly after the announcement of the settlement, saying that EDMC students would not be eligible for loan forgiveness unless new evidence were introduced, according to PoliticoPro. Duncan said EDMC’s actions were “not a misrepresentation to students. It was breaking the law and lying to us” and “If there is evidence of misrepresentation to students, we want to hear that and we are open for business.” The lie Duncan refers to is that EDMC lied when it said it was complying with the federal ban giving recruiters bonuses and commissions for getting more students enrolled.

In the meantime, Fabares said Art Institute graduates have been trying to raise awareness among students currently considering attending the schools. In October, AI graduates went to Chicago, Denver, Phoenix, San Diego, San Francisco, Portland, and Orange County locations’ open houses to warn students.

“They shut the blinds, rerouted attendees so they would not see us, tried to kick us off of public property, although many of the workers at the school came out and looked or laughed at us none of them were willing to try to come up and try talking with us,” said Fabares, who went to several of the sites.

This post has been updated with new statements from the U.S. Department of Education.