For Immediate Release - November 16, 2015

AG Healey Urges Feds to Use Money from National For-Proft College Settlement to Pay Down Student Debt

Education Management Corp. – Operator of New England Institute of Art – Settles Allegations of Federal and State False Claims Act Violations

BOSTON – Following today’s announcement of a $95.5 million multistate-federal False Claims Act settlement with Education Management Corp. (EDMC), the second-largest for-profit education company in the country, Attorney General Maura Healey is urging the federal government to use the funds it received to provide immediate relief to students harmed.

EDMC, headquartered in Pennsylvania, operates nationwide under four post-secondary school brands: South University, Argosy University, Brown-Mackie College, and the Art Institutes – which includes the New England Institute of Art (NEIA) in Brookline. Student enrollment across EDMC’s school brands exceeds 100,000 students. Massachusetts will recover approximately $75,000 from the settlement and will use the money to pay down state loans given to NEIA students. AG Healey has argued that the Department of Justice, with its share of $52.62 million in recoveries, to do the same for students nationwide.

“Every single dollar recovered in this settlement can and should be used to help students struggling with loans from EDMC,” AG Healey said. “While this settlement sends a strong message to the predatory for-profit education industry, I urge the Department of Justice to apply these funds to bring down student loan balances immediately. As millions of students struggle with their college loans, it is our hope that the federal government will not continue to pursue borrowers victimized by this scheme for debt that has already been recovered by this settlement.”

Part of today’s settlement with EDMC, to which the AG’s Office is a party, is the result of four separate qui tam, or whistleblower lawsuits, filed in federal court in Pittsburgh, Pennsylvania, and Nashville, Tennessee, under the federal False Claims Act (FCA) and various state false claims statutes.

The primary allegation was that EDMC violated federal regulations by paying bounties to its admissions personnel based purely on the number of students they enrolled.  Regulations under Title IV of the federal Higher Education Act prohibit schools from making certain types of payments to recruiters. From 2003 to the present, EDMC allegedly falsely certified to the U.S. Department of Education and various state offices of higher education that it was complying with Title IV regulations, in order to be eligible to receive federal grant and loan dollars.

In addition to resolving these and other FCA claims, the settlement was completed in parallel with the resolution of a multistate consumer protection investigation focusing on ways that EDMC misled potential students.  That settlement does not result in a separate monetary recovery for the states involved, but does provide conduct relief and require EDMC to forgive institutional loans made to certain short term students. The Massachusetts Attorney General’s Office did not join this multistate, and instead is continuing its ongoing review of how EDMC allegedly committed unfair and deceptive practices against students in Massachusetts. 

Current and former students of the New England Institute of Art who have concerns regarding NEIA’s conduct or their experiences at the school should call the Attorney General’s Hotline at 888-830-6277.

The False Claims Act case was handled by Division Chief Glenn Kaplan and Legal Analyst Diana Hooley of Attorney General Healey’s Insurance and Financial Services Division.

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