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$95.5 million settlement by EDMC is ‘significant achievement’ in fraud cases against for-profit colleges

The second largest for-profit college operator in the US agreed Monday to pay a settlement of $95.5 million to resolve allegations that it was running a “high pressure boiler room” where admissions officers were compensated purely based on how many students they enrolled.

The government’s multi-year, multi-agency investigation was brought on by several whistleblowers from across the country who filed “qui tam” False Claims Act lawsuits against Education Management Corp. The settlement, in which EDMC was not required to admit any wrongdoing, resolves all those cases.

Claire Sylvia, a partner at Phillips & Cohen LLP, said the settlement “is a significant achievement by the Department of Justice and the Department of Education, working cooperatively with whistleblowers, to enforce the incentive compensation ban.”

The company’s alleged recruiting tactics violated a provision of the Higher Education Act, which seeks to ensure that prospective students will choose higher education institutions without the risk of high pressure sales tactics or unrealistic promises from recruiters.

The incentive compensation ban also seeks to ensure that for-profit schools do not incentivize their recruiters to induce or coerce students to take on massive student loan debt.

In addition to the settlement, Education Management Corp. will forgive the student loans of roughly 80,000 former students. The loan forgiveness program will cost more than $102 million on top of the $95.5 million settlement, according to the New York Times.

The whistleblowers and the states who participated in the lawsuit will receive shares of the settlement.

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