Dive Brief:
- Education Management Corp., agreed to pay $95.5 million to resolve claims that it paid employees based on enrollment — which violates federal law. The Pittsburgh-based company admitted no wrongdoing. ABC News reports the loans of 80,000 former students totaling $102.5 million will be forgiven.
- The Department of Justice said Education Management went against a federal ban on incentive compensation at schools participating in federal financial aid programs. The law is in place to prohibit schools from luring students into loans to boost revenue.
- Education Management told the Department of Education that it was in compliance — while it was actively paying employees based on the number of students they were enrolling. A host of other incentives including paid trips and tickets to events were also used to compensate recruiters.
Dive Insight:
The crackdown on for-profit schools like ITT and Corinthians and accreditors continues.
Attorney General Lorretta Lynch said Monday the settlement represents "a historic step forward in our collective and ongoing fight against fraudulent and abusive practices in the for-profit education industry."
According to the complaint, starting in July 2003 and through June 2011 about 90% of tuition — $11 billion — paid to Education Management came from federal grants and loans. The investigation began in 2007 with a whistleblower lawsuit.
"We are also pleased to have resolved the civil claims raised by the Department of Justice and state attorneys general," Education Management president and chief executive Mark A. McEachen said in a statement. "Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students."
