Foundation to Buy Education Management Corp., Convert Campuses Into Nonprofits

Source: Andy Thomason, The Chronicle of Higher Education, March 3, 2017

The Dream Center Foundation, a charitable organization, will acquire the Education Management Corporation and convert its remaining campuses from for-profit status to nonprofit, according to a news release from the foundation. The Obama administration’s heightened regulation of for-profit colleges was not kind to the once-sprawling for-profit educator known as EDMC. In 2015 the corporation reached a $95.5-million settlement with the federal government over claims that it had pressured and misled prospective students. The corporation has closed many of its campuses in recent years. According to the foundation’s news release, EDMC’s Art Institutes, Argosy University, and South University will become nonprofit entities. …

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For-Profit College Operator EDMC Will Forgive Student Loan
Source: Stephanie Saul, New York Times, November 16, 2015

The for-profit college operator Education Management Corporation will forgive loans to about 80,000 former students nationwide as part of an agreement with state attorneys general resulting from a multiyear investigation of the company’s aggressive recruitment practices. FROM OUR ADVERTISERS The $102.8 million loan forgiveness program was announced on Monday in Washington along with a separate $95.5 million civil settlement with the Department of Justice, the result of a whistle-blower lawsuit accusing the company of using boiler-room tactics to enroll students who had little chance of succeeding in college. … Under the settlement with the states, students nationwide who were enrolled for 45 days or fewer and who had transferred fewer than 24 credit hours from another university will see their private loans automatically forgiven by the company, said Nathan Blake, an assistant attorney general in Iowa, one of the lead states involved in negotiations with the company. The average student eligible for the program will receive about $1,370 in loan forgiveness. … The company has 110 online and brick-and-mortar locations in 32 states and about 100,000 students. Its schools operate under the names the Art Institute, Argosy University, Brown Mackie College and South University.

EDMC to close 15 Art Institute locations
Source: Justine Coyne, Pittsburgh Business Times, May 6, 2015

Education Management Corp. is closing 15 of its Art Institute campuses, a spokesman for the company confirmed Wednesday. The decision will impact about 200 employees immediately, but will not have an impact on employment at EDMC’s Pittsburgh headquarters, according to EDMC spokesman Chris Hardman…. A total of 5,432 students are enrolled among the campuses that are slated to close, according to a list provided by EDMC. The company will undergo a teach out process at each location, meaning each campus will continue to offer courses, student services and placement assistance until the last student has graduated, according to Hardman. Campuses were notified of the closures Wednesday. …. Concerns have been raised that some of the Art Institute’s programs will not meet pending federal gainful employment regulations, which are expected to go into effect July 1. To meet these gainful employment standards, a program will have to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income, or 8 percent of total earnings. ….


Whistleblower Suit Alleges For-Profit College Tricked Veterans Into Debt /Documents unsealed last week also allege financial aid fraud by EDMC
Source: Molly Hensley-Clancy, BuzzFeed, December 16, 2014

Unsealed documents from a 2011 whistleblower lawsuit lay out a system of alleged financial aid fraud by EDMC, a financially troubled for-profit college operator that owns the massive Art Institutes chain, which includes falsifying federal financial aid documents and tricking veterans into taking out excess loans. The allegations add a new dimension to the case against EDMC, which includes two other whistleblower suits. The Justice Department and four states joined a separate suit filed in 2007 alleging that the company violated federal law by paying recruiters based on how many students they enroll. The DOJ has not yet said whether it will join this suit, said a lawyer on the case, Alan Perer…. The suit, which was unsealed by a federal judge last week, alleges EDMC recruiters were directed to falsify information on students’ financial aid documents to maximize the money flowing to the school, in what one former admissions representative described as a “pervasive” practice. EDMC derives more than 90% of its revenue from the federal government, including GI Bill funds that pay for the education of veterans. ….

Students say for-profit art college delivered debt – but no jobs
Source: Melody Petersen, Orange County Register, April 30, 2014

Art Institute’s high-pressure recruiters draw criticism. Students talk of staggering loan debt. … Bieri’s story, as well as similar accounts from other former students, are echoed in two pending federal lawsuits against Education Management Corp., the company that owns the 50 Art Institute campuses across the country. The lawsuits, filed by former employees, claim that the company’s recruiters frequently misled potential students because of the financial incentives they received for enrolling them. Chris Hardman, vice-president of communications for Educational Management Corp., or EDMC, said the company believes the lawsuits have no merit. He added that he could not speak about individual student cases because of privacy laws….

For-Profit College Chain Can’t Shake Lawsuit
Source: Rose Bouboushian, Courthouse News Service, June 4, 2013

Education Management Corp., the nation’s second largest operator of for-profit colleges, cannot dismiss claims it lied about its eligibility for federal student financial aid, a federal judge ruled. Based in Pittsburgh, EDMC offers career programs at 110 campuses in North America; it had nearly 132,000 students as of October 2012, according to its website.

Jason Sobek, who was its associate director of admissions from June 2008 through November 2010, sued the company and its subsidiaries, Education Management LLC, South University LLC dba South University Online, Argosy Education Group dba Argosy University Online, and The Art Institutes International LLC dba The Art Institutes Online.

In the lawsuit, Sobek said the colleges made false claims about their eligibility to receive federal student loan funding, and about (I) accreditation of nursing programs; (II) job placement statistics; (III) tuition costs; (IV) satisfactory academic progress statistics; (V) incentive compensation ban; and (VI) reverse False Claims Act – failing to report students who should have been dropped from school rolls.

…Goldman Sachs and Providence Equity Partners acquired EDMC and its 70 schools for $3.4 billion in 2006.