Md. student loans forgiven in for-profit college settlement

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Education Management Corp., the second-largest U.S. for-profit college operator, agreed to settle whistleblower lawsuits in which it’s accused of illegal recruiting practices for $95.5 million, the largest such accord in American history, U.S. Attorney General Loretta Lynch said.

The company in addition will forgive more than $100 million in student loan debt originated by the company and not federally backed.

Pittsburgh-based Education Management operated a “high pressure recruitment mill,” paying recruiters based on the number of students they persuaded to enroll, Lynch said Monday at a Washington press conference.

The agreement, announced jointly with U.S. Secretary of Education Arne Duncan, Iowa Attorney General Tom Miller and Pittsburgh U.S. Attorney David Hickton, resolved four lawsuits filed under the federal False Claims Act. Thirty-nine states, including Maryland, simultaneously announced the accord.

Maryland Attorney General Brian E. Frosh said the agreement will forgive more than $1.4 million in loans for nearly 1,000 former Maryland students who took online courses. Education Management has more than 100,000 students nationwide.

The agreement also requires Education Management to provide access for all students to an interactive online financial disclosure form; bars the company from making misrepresentations to students; prohibits it from enrolling students in unaccredited programs; and institutes an extended period when new students can withdraw with no financial obligation.

“EDMC practices were unfair to Maryland students and to taxpayers, who backed many federal student loans that were destined to fail,” Frosh said in a statement. “This is a comprehensive agreement that releases many former students from the burden of debt, and requires the company to put in place new transparency and accountability measures that will benefit future students.”

While the company acknowledged the accords in its own statement, it maintains it committed no wrongdoing. A multistate investigation began in January 2014 based on numerous complaints from current and former students.

“When we started our work together, the attorneys general had many concerns about the ways that some higher education providers recruited students. EDMC wanted to take the lead in developing the best ways to address each one of these concerns, and we have done so,” said EDMC president and CEO Mark A. McEachen in a statement. “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.”

McEachen also is chairman of The Dolan Company, which owns The Daily Record.

The for-profit college sector has been imploding, as federal and state regulators have been reining in schools, accusing them of preying on low-income students and saddling them with student loans they can’t repay. Corinthian Colleges collapsed earlier this year in the largest shutdown in U.S. higher education, and the government is in the process of forgiving loans to some former students.

Lynch said the agreement with Education Management, which received more than 90 percent of its revenue from U.S. taxpayers in the form of educational funding, was part of a more wide-ranging crackdown on practices she called fraudulent.

EDMC operates schools under the brands of the Art Institutes, Argosy University, Brown Mackie College and South University in 110 locations in 32 states and Canada. Students can earn college and graduate degrees in fields including food preparation, business, fashion and information technology.