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Multimillion dollar settlement reached with parent company of Brown Mackie College

Indiana Attorney General Greg Zoeller announced Monday Education Management Corporation (EDMC), the parent company of Brown Mackie College, has reached two settlements that include the state of Indiana, 38 other states and the Department of Justice for deceptive practices.

The company was accused of illegal recruiting practices, misrepresentation of accreditation and job placement.

One settlement is a federal whistleblower suit, the other is a consumer protection suit that requires the company to reform its recruiting and enrollment practices.

In signing the settlement, EDMC did not admit wrongdoing.

Indiana's settlement with EDMC will result in $5.7 million worth of loan forgiveness to 5,530 students of Brown Mackie College and The Art Institutes.
Indiana will also receive $1.2 million to reimburse the treasury for costs associated with EDMC's practices.

As part of the settlement, EDMC must revise its marketing, recruitment and enrollment practices. The company must appoint an independent administrator to ensure EDMC is complying with the terms of the settlement.

EDMC will pay Indiana, 4 other states and the federal government $95.5 million to settle whistleblower lawsuits alleging EDMC paid recruiters incentives tied to the number of students they enrolled.

“This settlement requires EDMC to forgive certain student loans and correct its deceptive and misleading recruitment practices that led students to get overextended with debt without the benefit of a useful degree.  The enforcement effort by state attorneys general and our federal colleagues recovered public funds and puts strict monitoring in place to ensure EDMC’s compliance and restore some integrity and consumer protections to the process," Zoeller said in a press release regarding the settlement.

Students who are eligible for forgiveness of outstanding loans in Indiana are certain students of

  • Brown Mackie College in Indianapolis, Fort Wayne, South Bend, Michigan City and Merrillville
  • The Art Institute of Indianapolis.

This includes students enrolled in an EDMC program with fewer than 24 hours of transfer credit who withdrew within 45 days of the first day of their first term, where their final day was between January 1, 2006, and December 31, 2014.

EDMC must contact students who are eligible for loan forgiveness within 90 days.

Total, EDMC will provide $102 million in loan forgiveness to 80,000 students in the US and Canada.

“A common scenario in the consumer complaints states heard was that students were lured into enrolling in Brown Mackie College or The Art Institutes through deceptive advertising and misleading promises. Students who borrowed student loans discovered too late the courses were non-accredited or the quality was questionable and did not translate later into job opportunities, leaving former students owing significant student loan debt without a return on their college tuition investment nor their time spent.  This multistate settlement will assist some former students by canceling outstanding student loan debt while putting new requirements on EDMC going forward to end abusive recruiting practices so future students are not misled,” Zoeller said in the press release.

As part of the settlement with the Department of Justice, EDMC must not make misrepresentations to students or prospective students about accreditation, graduation rates, job-placement rates, transferability of credits, financial aid, veterans’ benefits or licensure requirements. EDMC must not engage in misleading advertising or deceptive or abusive recruiting practices to persuade students to enroll or remain enrolled, and must record online chats and telephone calls with prospective students, according to Zoeller's office.

EDMC must provide a personalized single-page disclosure to each prospective student including their anticipated total cost, median debt, default rate, warnings that credits may not transfer to other institutions, median earnings of who those who complete the program and job-placement rates. As part of that requirement, EDMC must provide disclosure that certain programs are non-accredited and will not enable students to obtain licensing in a licensed profession in the state.  Also, EDMC must reform its job-placement rate calculation methodology to provide more accurate disclosures to students about their likelihood of obtaining gainful employment in their chosen careers, according to Zoeller's office.

“Now more than ever, a college degree is the best path to the middle class, but that path has to be safe for students,” said U.S. Education Secretary Arne Duncan in a press release. “This settlement should be a warning to other career colleges out there: We will not stand by while you profit illegally off of students and taxpayers. The federal government will continue to work tirelessly with state attorneys general to ensure that all colleges follow the law.”

Students who have complaints about EDMC who are not involved in this lawsuit can still file complaints with the Indiana Commission for Higher Education (CHE) http://bit.ly/1Yd9mW9, and with the Consumer Protection Division at www.IndianaConsumer.com.

Brown Mackie and Art Institute students or former students with questions can contact EDMC at 855-725-4301.

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