Profit Education Company to Forgive $102M in Loan Debt After

“Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students”, he said.

That’s important, because if the Education Department found that EDMC misled students into enrolling and taking out federal student loans – or if EDMC had admitted to it – those students could then petition Duncan’s department to discharge their debts under a provision in federal law that aims to shield borrowers from having to make payments on fraudulently-originated federal student loans.

For-profit colleges are reeling from mounting government probes, tanking stock prices, regulatory scrutiny and depressed student enrollment.

The Obama administration has again shown that it is as lax in reining in for-profit college corporations as it is in disciplining Wall Street firms.

“This historic resolution exemplifies the Justice Department’s deep commitment to protecting precious public resources; to defending American consumers; and to standing up for those who are vulnerable to mistreatment, abuse, and exploitation”, Attorney General Loretta E. Lynch said in a statement.

Student advocates and a few state prosecutors worry that Duncan has no intention of canceling debts owed by former EDMC students who may have been misled into taking out federal student loans. That averages to about $1,530 per student.

With student debt now topping $1.2 trillion, Rohit Chopra, student loan ombudsman at the Consumer Financial Protection Bureau, discusses what borrowers need to know.

Education Management, based in Pittsburgh, Pa., is the latest for-profit education company to have problems with the federal government.

The EDMC is required to send out a mailed notice to qualified students within 90 days.

As part of the agreement with the attorneys general, EDMC will need to provide prospective students with a single-page information sheet that includes information like the student’s anticipated cost, median debt for the program they’re interested in and the loan default rate for those in the program.

More than 600 former Iowa students will have roughly a half million dollars in loans forgiven under the settlement.

The company operates several schools in Southern California, including Argosy Universities in Ontario and Orange and the Art Institutes of California in San Bernardino and Santa Ana.

The Justice Department said Education Management Corporation (EDMC) used deceptive practices to sign up students when it knew the odds of them finishing its programs or getting jobs after them were low.

In resolving the federal and state complaints, Education Management, which is owned partly by Goldman Sachs, did not acknowledge wrongdoing.

A $78.5-million settlement that the University of Phoenix agreed to pay in 2009 had previously been the highest for a higher-education false-claims case. These are students who left their schools within 45 days of their first semester, and whose final day of attendance was between January 1, 2006, and December 31, 2014.

“EDMC pledged to the United States that it was not paying incentive compensation, when in fact it fostered a high-pressure boiler room sales operation that resulted in its recruiters’ use of abusive tactics to enroll students”, said U.S. Attorney David Hickton of the Western District of Pennsylvania.

That settlement reflects the company’s financial condition and ability to pay, Lynch said. “We’re open for business” to hear those claims, he said at the news conference.