Education Management Corporation must forgive $103M student loans for violating consumer protection laws

Education Management Corporation, the second largest for-profit college in the US, will forgive almost $103 million worth of student loans for questionable recruiting tactics and misleading students on benefits and job placement numbers.

The Trib Live reported that the settlement is part of a deal with 39 states and the District of Columbia. The case is based on an $11 billion worth of student loans to EDM from 2003 to 2011. The school allegedly violated consumer protection laws.

According to CNN, besides forgiving the student loan debt, the company is also asked to pay $95.5 million to settle a whistle-blower lawsuit against its recruiting strategy. EDMC owns the Art Institures, including schools operating under the names of Argosy University, Brown Mackie College, and South University.

Chronicle reported that the lawsuit against EDM dates back 2007. It alleges that the for-profit college paid admission recruiters to get federal student aid. The recruiters will be paid depending on the number of students they recruit. EDM, however, lied about this to the Education Department. The whistle-blower lawsuit was announced Monday by the Department of Justice, which became part of the suit in 2011. Paying recruiters based on the number of students enrolled is illegal for schools that are granted federal student loans and grants.

Attorney General Tom Miller, who was one of the 39 state attorney generals who came into a settlement with EDM Monday, said, "Our investigation gave us a pretty clear picture of how EDMC lured prospective students into its programs, and how many students left the program with unfulfilled promises and oftentimes tremendous debt."

EDMC operates with 100 schools in the US, as well as in Canada. For-profit colleges rely on federal funds from the loans and grants its students get. Some 90 percent of EDMC's income is from these funds.

Some 80,000 students will get loan relief due to this settlement. That is worth $1,370 per student. The forgiveness will be for former students who enrolled from 2006 to 2014 and stopped within 45 days of the first term, but were still accountable for the bills.