Settlement gives some Art Institute students debt relief

The Art Institute of Philadelphia is among a network of for-profit colleges nationwide that will forgive nearly $103 million in student loans under a multistate settlement of complaints that the company used high-pressure tactics to enroll unqualified students.

In Pennsylvania, 2,683 students stand to benefit from a total of more than $4 million in debt relief, said Pennsylvania Attorney General Kathleen G. Kane, whose office noted that 39 state attorneys general joined the settlement with Pittsburgh-based Education Management Corp., which enrolls more than 100,000 students online and at 110 locations in 32 states and Canada.

In New Jersey, nearly 1,000 students are eligible to get about $1.3 million in relief, according to acting Attorney General John J. Hoffman. The company has no campuses in the state, but the students either were enrolled online or attended classes in a nearby state, he said.

"Today's consumer settlement is important," Hoffman said, "because it not only provides a degree of relief for EDMC students who were left with unfulfilled promises and significant debt, but ensures greater accountability and transparency by the company going forward."

Only students who enrolled with fewer than 24 transfer credits, withdrew within 45 days of their first term, and attended their last day between Jan. 1, 2006, and Dec. 31, 2014, are eligible for loan forgiveness. The average amount is expected to be about $1,370 for each student.

In addition to the Philadelphia site, Education Management also operates art institutes in Pittsburgh and York, Pa., though the York site is being phased out.

Neither Kane's office nor the company provided a breakdown of how many of the affected students are at the Philadelphia institute, which enrolls 1,500 students.

More than 80,000 former students companywide are estimated to be eligible at its schools, which operate under the names of the Art Institutes, Argosy University of California, Brown Mackie College, and South University.

Education Management, owned in part by Goldman Sachs, has been under fire for years for allegations of unfair and deceptive recruiting, including that it misrepresents the number of graduates who get jobs in their field of study, makes "emotional pitches" to enroll students regardless of their academic qualifications or likelihood of success, and fails to adequately disclose information about its program costs, according to the Pennsylvania complaint.

The company also entered into a separate $95 million settlement with the U.S. Department of Justice over allegations that it paid incentive-based compensation to its admissions recruiters tied to the number of students they recruited.

Under the settlements, the company must reform its recruitment practices, including recording phone calls between students and recruiters to ensure compliance with guidelines and making its recruitment material more transparent.

The company also will allow students to withdraw with no tuition obligation up to seven days after their first class at on-campus schools and up to 21 days after the start of the term at online programs if they have fewer than 24 credits.

The company, which admits to no wrongdoing, called the settlements "groundbreaking," and said they end the investigations into the company's practices.

"EDMC worked with state attorneys general to develop new, more transparent recruiting and disclosure standards, which the company hopes will serve as a model for higher education," the company said in a news release.

ssnyder@phillynews.com 215-854-4693 @ssnyderinq www.inquirer.com/campusinq

Inquirer staff writer Dani Blum contributed to this article.