Education Management Corporation (EDMC), one of the nation’s largest for-profit college operators, has agreed to pay $95.5 million to settle a lawsuit brought against it by four whistleblowers on behalf of the U.S. government. The settlement will also resolve an investigation into the school’s recruiting practices by a collection of some 40 states. EDMC runs four chains of for-profit colleges in cities across the United States, including the Art Institute, Argosy University, Brown-Mackie College and South University.
The whistleblowers each brought separate lawsuits against the Pittsburgh-based company, alleging that EDMC had engaged in illegal recruiting tactics dating as far back as 2003 and continuing through 2011. They accused the schools of pressuring recruitment counselors to enroll students at any cost and even going so far as to pay employees based solely on the number of students they were able to sign up, a practice that is prohibited by federal law.
EDMC also stood accused of putting profits ahead of their mission to educate students by enrolling individuals who were not qualified for their programs. This meant that a number of people enrolled in the company’s schools took on federal loans that later resulted in default.
The company’s deal with the states will mean that $102.8 million in education loans will be automatically forgiven, providing relief for roughly 80,000 former students of its colleges. Those who were enrolled for a period of less than 45 days and transferred no more than 24 credits from another university should see their EDMC loans forgiven. The average amount that each student will receive is about $1,370 in loan relief.
Money from the settlement will be shared between the U.S. federal government, the whistleblowers, their attorneys, and the co-plantiff states. Approximately $11.3 million of the $52.62 paid to the United States will be divided between the four whistleblowers and their legal counsel.
The Department of Justice says that the $95.5 million settlement it has reached with EDMC is a reflection of the company’s current financial situation and its ability to pay. U.S. Attorney General Loretta Lynch made a statement claiming that the corporation was “operating essentially as a recruitment mill” and that its actions were “not only a violation of federal law but also a violation of the trust placed in them by their students- including veterans and working parents- all at taxpayer expense.”
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