Education Management Corp., the Pittsburgh-based operator of the Art Institute of York and other for-profit colleges around the country, will pay nearly $96 million and change the way it recruits students to settle investigations of deceptive business practices by the U.S. Department of Justice and 39 states, including Pennsylvania.
The agreement requires EDMC to develop more transparent recruiting and disclosure standards and to forgive the debts of certain former students. However, the settlement includes no admission of wrongdoing, EMC said Monday.
The new recruitment standards will allow prospective students to: receive an easy-to-read disclosure sheet about EMC’s graduate placement rate and student financial impact; use an interactive tool to personalize and assist in their higher education decisions; receive no-cost orientation when they start attending one of EDMC’s schools; withdraw with no tuition obligation up to a week after their first class at an on-campus school or up to 21 days after they begin on online program.
EDMC said it will also implement additional internal controls for admissions and financial services representatives, including recording telephone calls and online chats with students unless a student requests otherwise.
EDMC said it worked with state attorneys general to develop the changes.
Multiple lawsuits accused the company of using deceptive business practices to obtain $11 billion in federal and state student aid between 2003 and 2011. Some of the lawsuits claimed EDMC illegally paid its recruiters to sign up students; used over-aggressive recruitment practices; accepted unqualified students and allowed them rack up loans they couldn’t pay back; lied to state and federal authorities about its job-placement statistics to continue receiving student aid it wasn’t entitled to; and lowered the income listed on some students’ applications to receive more federal money.
“We are pleased to have resolved the civil claims raised by the Department of Justice and state attorneys general,” EDMC President and CEO Mark A. McEachen said. “Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students.”
EDMC announced last May that it would close the Art Institute of York along with 14 other Art Institute locations over the next couple of years. The York campus laid off 10 of its 90 staffers, most of whom were employed in the school’s admissions office. Current students, reportedly numbering around 300, are being permitted to complete their course work toward a degree.
Other Art Institute locations slated for closure include locations in California, Florida, Georgia, Michigan, Missouri, New York, Ohio, Texas, Utah, Washington, D.C., and Wisconsin.
EDMC‘s other for-profit education systems include Argosy University, Brown Mackie Colleges and South University, with a total of 110 locations in 32 U.S. states and Canada.