Senators: Settlement With For-Profit EDMC Offers No Relief


United States Senator Elizabeth Warren recently made the argument that the federal government’s settlement made with a for-profit college company may not be enough to offer relief to students who owe billions in loans.

Warren joined US Senators Dick Durbin and Richard Blumenthal in letting the Departments of Education and Justice know of their concerns through a letter, which stated that the settlement recently made with Education Management Corporation, which runs the Art Institutes, Brown Mackie and others, does not keep company executives accountable, nor does it provide students with relief, writes Shannon Young for MassLive.

“We are profoundly dissatisfied with a settlement in which the government recovered a miniscule fraction of stolen taxpayer funds, held no individuals accountable while failing to even obtain an admission of wrongdoing from EDMC and now may not even provide relief to thousands of students who owe billions of dollars in student loans because they were illegally recruited by EDMC,” they wrote.

The senators went on to say that the predatory practices the corporation engaged on brought harm to its students.  The letter made a push for the Department of Education to give full, immediate relief to those students, arguing that a separate settlement gave $100 million in debt relief for borrowers of EDMC private loans by state Attorneys General, and that this should offer enough evidence of wrongdoing to forgive federal loans.

However, Education Secretary Arne Duncan has yet to commit to providing this relief to EDMC borrowers, although the authority to do so exists.  Cases that would have borrowers who had enrolled in Corinthian Colleges receive forgiveness on their federal loans are currently being reviewed by the department.

The DOJ combined with four states in a whistleblower suit against the company in 2011 after claims were made that it had illegally given incentive-based compensation to admissions recruiters, which, the letter claims, put students into programs that they did not have the skills to succeed in.  After the DOJ joined the effort, the $11 billion received by the company in federal aid between 2003 and 2011 was questioned.  In addition, 39 state Attorneys General launched investigations into EDMC for possible fraud.

Just last month the state attorneys general won $102.8 million in private loan forgiveness over several settlements that will benefit 80,000 former students.

Separately, the Justice Department was awarded a $95.5 million civil penalty, although it did not receive anything in terms of federal student loan debt.

The letter also discussed the disappointment the senators felt toward prosecutors who could not get the company to admit to any wrongdoing even after the Justice Department announced a policy two months ago in an effort to bring more individual accountability from allegations of wrongdoing at the corporate level.

The settlement requires EDMC to pay $95 million in fines, which the senators say is less than 1% of the $11 billion in student loans the company received in a fraudulent manner.  They are expecting a response to their requests no later than December 17.