A company that owns two for-profit national university chains said Thursday it would write off nearly $ 500 million in debt owed by former students in a settlement with 48 states and the District of Columbia.
The deal with Career Education Corporation will resolve allegations that it lied about placement rates and misled potential students into enrolling. State attorneys general began investigating the company in 2014 following complaints from students and a damning report from the US Senate.
Company officials said Thursday they deny any wrongdoing, but called the settlement a “significant step.”
“We remained convinced that we can work with attorneys general to demonstrate the quality of our institutions and our commitment to students,” said Todd Nelson, CEO of the company, in a statement.
Based in Schaumburg, Ill., The company has approximately 34,000 students across two chains, Colorado Technical University and American InterContinental University. More than 90 percent of its students are enrolled through online courses, according to the company.
The deal has been signed by all states except California, which is negotiating its own separate deal, and New York, which has already made a deal with the company.
Of the $ 493 million in canceled debt, the largest share comes from borrowers in Florida, who will receive $ 68 million in relief, followed by Texas, with $ 51 million. The debt comes from institutional loans that the company has granted to students.
Other terms of the deal require the company to pay states $ 5 million to cover the cost of their investigations, and the company will now be required to provide all potential students with a single page disclosure containing information, including placement rates, anticipated costs and average graduates’ earnings.
State attorneys general called the deal a victory for students, saying it will provide debt relief for more than 179,000 borrowers across the country. In Illinois, where $ 48 million will be released, Attorney General Lisa Madigan said it was a fair outcome for students who were deceived by corporate schools.
“Today’s regulations ensure that the company treats students as they should have been from the start – with honesty and respect for their future,” said Madigan.
In its heyday, Career Education Corporation was among the nation’s largest for-profit university companies, enrolling more than 100,000 students in several chains, including Sanford-Brown College and Le Cordon Bleu, a group of culinary schools.
But after years of government scrutiny and steep drops in enrollment, the company announced in 2015 that it would start closing or selling most of its schools.
In addition to state investigations, the company has also been the subject of a Federal Trade Commission investigation since 2015, according to company records filed in September with the United States Securities and Exchange Commission. The FTC has examined the potential deception in the advertisement, according to the company, which says it is cooperating with the investigation.
The for-profit college industry faced a heavy crackdown under President Barack Obama, but saw a shift in its favor under President Donald Trump. For the past two years, Education Secretary Betsy DeVos has sought to relax regulations and reverse policies created under the previous administration.
But the industry has come under renewed scrutiny in recent weeks following the abrupt shutdown of Education Corporation of America, which was one of the country’s largest chains before collapsing amid severe financial difficulties. Democrats cited the shutdown as evidence the industry needs tighter oversight.
