Student loan forgiveness, end to deceptive recruitment part of for-profit college settlement

The Columbus Dispatch reported this week that many former students of several for-profit colleges in Ohio will see student loan debts erased under a settlement with Education Management Corp. of Pennsylvania. The corporation owns Brown Mackie College, The Art Institutes, South University, Argosy University and Stautzenberger College.

The attorneys general of several states, including Ohio Attorney General Mike DeWine, were investigating the corporation for allegations that the colleges recruited students with false claims and misled them about their chances for employment and income. The settlement ends this investigation and orders loan forgiveness as well as several other measures the corporation must undertake in order to comply.

The loan forgiveness applies only to students in limited circumstances. According to the Dispatch, they must have "entered the schools with fewer than 24 hours of transfer credit, withdrew within 45 days of their first term and last attended between 2006 and 2014." It only applies to private loans. Students may not discharge federal loans under this agreement.

The settlement also requires the corporation to be more open about costs and not to engage in deceptive recruiting. This includes measures such as giving prospective students information about total costs, likely job prospects and income; not misleading students about things like selectivity, graduation rates and accreditation; and allowing students to withdraw at no cost after a short period of enrollment.

The Wall Street Journal reports that the corporation also settled a lawsuit with the Department of Justice that was initiated by whistle-blowers, charging Education Management with violations of the False Claims Act. The suit alleged that the corporation paid recruiters incentive-based bonuses for the number of students they enrolled, in violation of the law. This resulted in a $95.5 million settlement which the federal government will share with the whistle-blowers and states involved, according to the New York Times.

The Times also reports that the settlement does not require the company to admit wrongdoing, which could have opened it up to greater liability with respect to individual students who could have potentially discharged their loans.

Photo credit: Alan Cleaver via Flickr.