Consumer News

AG Schmidt: More than 1,000 Kansas students to receive loan forgiveness

Release Date: Nov 16, 2015

TOPEKA – (November 16, 2015) – More than 1,000 Kansas students will receive more than $1 million in student loan forgiveness under the terms of a settlement reached today with Education Management Corporation (EDMC), Kansas Attorney General Derek Schmidt said.

EDMC, based in Pittsburgh, Pa., operates 110 schools in 32 states and Canada, including Brown Mackie College in Salina and Lenexa, and The Art Institute in Kansas City, Kan.

The agreement with attorneys general in 39 states plus the District of Columbia mandates added disclosures to students, including a new interactive online financial disclosure tool; bars misrepresentations to prospective students; prohibits enrollment in unaccredited programs; and institutes an extended period when new students can withdraw with no financial obligation.

Nationwide, the agreement requires the for-profit college company to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students.

After receiving numerous complaints from current and former EDMC students, state attorneys general initiated a multistate investigation in January 2014. Attorneys and investigators reviewed consumer complaints, reviewed company documents, and interviewed former EDMC employees.

“Our investigation revealed how EDMC lured prospective students into its programs, and how many students left the program with unfulfilled promises and oftentimes tremendous debt,” Schmidt said. “This agreement addresses concerns about the company’s business practices and puts in place new transparency and accountability.”

As part of the agreement, EDMC does not admit to the conduct alleged by attorneys general.

Those who will receive automatic relief related to outstanding EDMC institutional loans must have been enrolled in an EDMC program with fewer than 24 transfer credits; withdrew within 45 days of the first day of their first term; and their final day of attendance must have been between January 1, 2006, and December 31, 2014. Eligible students will receive a letter from EDMC within 90 days advising them that EDMC will no longer attempt to collect student debt forgiven under the terms of this settlement.

The agreement is expected to provide an average of $1,370 per person in loan forgiveness.

Today, EDMC also agrees to pay a $95 million settlement of a separate federal whistleblower lawsuit under the False Claims Act. In that case, brought by the U.S. Department of Justice on behalf of the Department of Education, the government alleged that EDMC illegally paid incentive-based compensation to its admissions recruiters tied to the number of students they recruit.

A copy of the Kansas consent judgment, filed today in Shawnee County District Court, can be found at http://1.usa.gov/1lrCUBB .

 

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