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EDMC Student Loans to be Forgiven After Fraud Probe

BY STATE SENATOR LARRY TEAGUE –

LITTLE ROCK – More than $703,000 in loans to about 800 former college students in Arkansas will be forgiven under a global settlement between state attorneys general, the federal Justice and Education Departments and the nation’s second largest for-profit higher education company.

It’s called Education Management Corporation (EDMC) and nationally it has about 100,000 students who attend colleges under the names South University, Art Institutes, Argosy University and Brown-Mackie College.

The majority are non-traditional students. They’re veterans, older adults and working parents.

For years, EDMC falsely reported to the federal Education Department and state Higher Education Departments that it was complying with a law that prohibits colleges from paying recruiters based on the number of students they recruit. EDMC’s recruiters were paid incentives to boost enrollment. The U.S. Attorney General called it “essentially a recruitment mill” and a “high pressure boiler room” that was “a vehicle for tapping into federal student aid funds.”

The government backed many of the loans, so taxpayers were on the hook when students were unable to keep up with their loans.

Many people were saddled with burdensome student loans that were “destined to fail,” said Leslie Rutledge, the Arkansas Attorney General.

In addition to forgiving student loans, EDMC agreed to change its recruitment practices and make its application process for financial aid much more transparent. When people apply to one of EDMC’s colleges, they will be given an accurate estimate of their financial commitment to the institution and their potential future earnings. They will be told the amount of debt that other students have accumulated while completing a degree program at the college.

According to the Attorney General, the agreement calls for EDMC to forgive about $102.8 million held by more than 80,000 former students from around the country.

EDMC is based in Pittsburgh and operates 110 schools in 32 states. Arkansas was one of 39 states, as well as the District of Columbia, that joined in a fraud investigation into EDMC’s recruiting practices.

About 90 percent of EDMC’s revenue is from federal aid funding, such as taxpayer-backed loans.

The string of lawsuits against EDMC began when two of its employees filed suits under whistleblower laws. Various states and the federal government intervened. Testimony was that recruiters were encouraged to enroll any student who could get a federal loan or grant, whether or not they were academically prepared for college.

Also, the consumer complaint divisions of numerous state attorneys general were getting reports from students and former students about EDMC. The attorneys general began a multi-state fraud investigation last year.

Medicaid Payment Integrity Unit

The Department of Human Services has hired John Parke of Paron as the director of the new Payment Integrity Unit, which will focus on prevention and recovery of improper spending of Medicaid funds. Parke’s background is in business and data analysis.

In addition to reducing wasteful spending, the new office will identify more efficient procedures for filing and paying claims.

Last year 776,050 Arkansas were eligible for some type of Medicaid services.

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