Giant for-profit college chain settles with feds for $95 million

One of the nation's largest chains of for-profit trade schools and colleges has reached a $95.5 million settlement with the Obama administration over allegations it had run a “high-pressure boiler room” telemarketing scheme to push students into enrolling.

In the settlement announced Monday, Education Management Corp. is not admitting wrongdoing, but the agreement resolves allegations that the company used illegal enrollment incentives to pay its recruiters and exaggerated to prospective students its career-placement ability. The federal complaint is available here. 

The Pittsburgh-based company has more than 100,000 students at schools under four brands: the Art Institutes, South University, Argosy University and Brown-Mackie College.

Under the settlement, the company will "provide more transparency during the recruiting process," pay penalties and forgive many of its loans to students, the Justice Department said.

The settlement "sends an unmistakable message to all for-profit education companies: The United States will aggressively ferret out fraud and protect innocent students and taxpayer dollars from this kind of egregious abuse," said U.S. Attorney David J. Hickton of the Western District of Pennsylvania.

Education Management will pay penalties through 2022. It will also forgive loans to students who left its schools within 45 days of their first term between 2006 and 2014.

“This settlement should be a warning to other career colleges out there," U.S. Education Secretary Arne Duncan said. "We will not stand by while you profit illegally off of students and taxpayers. The federal government will continue to work tirelessly with state attorneys general to ensure that all colleges follow the law.”

“Now more than ever, a college degree is the best path to the middle class, but that path has to be safe for students,” Duncan said.

The settlement also resolves cases brought by the District of Columbia and nine states: California, Florida, Indiana, Massachusettes, Minnesota, New Jersey, New Mexico, New York and Tennessee.

Al Jazeera and The Associated Press