For-profit colleges could forgive millions in student debt under deals with IL, other states

By Vimbai Chikomo | Dec 16, 2015

Illinois Attorney General Lisa Madigan has announced two settlements with for-profit college operator Education Management Corporation (EDMC). The settlements would “significantly reform” recruiting and enrollment practices for the company, forgive over $3 million in loans for Illinois students, and reimburse the state of Illinois for money the education company obtained fraudulently, Madigan's office said.

“More than 2,600 students in Illinois are eligible for debt forgiveness,” Eileen Boyce, press secretary to the attorney general’s office said.

EDMC operates 110 schools in 32 states and Canada through four education systems. Locally, the company operates the Illinois Institute of Art, with locations in Chicago, Schaumburg and Tinley Park, and Argosy University, with campuses in Chicago and Schaumburg.

Madigan and attorneys general in 39 states and the District of Columbia reached a consumer fraud agreement with EDMC requiring the company to provide debt relief for more than 80,000 former students nationwide on outstanding student loans, which totaled $102.8 million.

In addition, the agreement requires EDMC to disclose the truth about the cost of the school and job placement expectations upon graduation, prohibits the school from “making misrepresentations” to prospective students, and bans enrollment into programs lacking either in accreditation required for state licenses, or for employment with the majority of employers. The school must also enact an orientation period, giving new students the opportunity to withdraw with no financial obligation.

On a brochure from the attorney general’s office on how to choose a college, Madigan's office issued the following advice for people considering college:

“When choosing a school, students should be especially mindful of for-profit colleges, some of which are known to employ deceptive and unfair marketing tactics that can land students in degree programs with limited job prospects and thousands in debt,” the attorney general's office wrote.

The second settlement was a global agreement involving Madigan, attorneys general in 11 states and the District of Columbia, several whistleblowers and the federal government, requiring EDMC to pay $95.5 million, including $1.9 million to the state of Illinois, to resolve alleged violations of the False Claims Act and claims by the Consumer Protection Consortium. The agreement resolves allegations that EDMC illegally paid incentives to its admissions recruiters for the number of students they enrolled.

According to the release, Madigan began an investigation into EDMC’s practices after a former EDMC employee filed a whistleblower lawsuit in the Western District of Pennsylvania, alleging the education company knowingly violated a ban on enrollment-based compensation, allegedly rewarding recruiters based on the number of students they enrolled, and “fraudulently induced” the state of Illinois and the federal government into providing EDMC students with financial assistance.

In 2011, the information uncovered in the investigation prompted Madigan’s office to file a joint lawsuit with the federal government and the states of California, Florida, and Indiana against EDMC.

In a press release regarding the settlement, EDMC President and CEO, Mark A. McEachen, said that EDMC was addressing the concerns raised by the attorneys general.

"EDMC is proud to have worked closely with the state attorneys general to produce a new, one-page, easy-to-read disclosure that provides important information for students as they consider their higher education options at one of our schools," the release stated.

Current and former EDMC students can find out if they are eligible for this relief by going to the EDMC website and calling the number added specifically for this settlement. Those who qualify will receive forgiveness of outstanding student debt.

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Education Management Corporation (EDMC) IL Attorney General Office

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