Nearly 180,000 former Students at For-Profit Schools run by Career Education will not have to Repay $494 Million they owed to the company, a Group of 49 State Attorneys General announced Thursday.
The Agreement to wipe out the Debt held directly by Career Education, such as unpaid Tuition, ended a Five-year Multistate Investigation into Complaints that the Company used Predatory and Deceptive Recruiting Tactics.
Career Education misled Students about the Cost of its Programs and its Graduates’ Job Prospects, said Tom Miller, the Attorney General of Iowa, whose Office helped Lead the States’ Investigation. In some Cases, Career Education charged Students for Vocational programs that lacked the Accreditation needed for them to obtain a License and work in their Field, according to the Settlement Documents.
Career Education, based in Schaumburg, Ill., denied any Wrongdoing. Todd Nelson, the Company’s Chief Executive, called the Settlement an “important milestone” in its turnaround efforts. The Company was once among the Country’s Largest For-Profit Education Chains but has Shrunk to about a Third of its former Size as State and Federal Regulators Increased their Scrutiny of the kind of Vocational Programs it runs.
The Debt being Eliminated averaged about $2,750 per Person. Career Education had already written most of it off as Bad Debt, it said in a Regulatory Filing on Thursday. Only $1.3 Million remained Active on the Company’s Financial Statements.
Career Education had until recently been trying to Collect on a significant Portion of the nearly $500 Million owed to it by former Students, according to Jessica Whitney, the Consumer Protection Director for the Iowa Attorney General’s Office. Those efforts must now Stop, she said, and the Company is required to ask Credit Bureaus to Delete those Debts from Borrowers’ Credit Reports.
The Deal affects only Debt held by Career Education and does not cover Federal Student Loans, which are managed by the Education Department, or Private Student Loans owed to other Lenders.
The only State Not included in Thursday’s deal, California, is preparing its Own Settlement with Career Education, the Company said.
The Education Department can forgive the Federal Loans of Students who were Defrauded by their Schools through its Borrower Defense Program. At least 2,000 former Career Education Students have Applied for that Relief, according to Public Records gathered by Researchers, but the Education Department has Not yet made a Decision on any of those Applications.
The State Investigators have offered to Share their Findings with the Education Department, Ms. Whitney said. Borrowers who File a New Borrower Defense Application, or have One Pending, “can certainly submit the facts of the case as evidence” to support their Claim, said Liz Hill, an Education Department Spokeswoman.
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At its peak, Career Education enrolled more than 100,000 Students at 100 Campuses Worldwide, including the Le Cordon Bleu Chain of Culinary Schools and the Vocationally focused Sanford-Brown Colleges and Institutes.
But a String of Lawsuits and a Nationwide Regulatory Crackdown on For-Profit Schools Sharply Reduced its Financial Fortunes. In 2015, the Company decided to Close most of its Campuses. Its Two remaining Chains, American InterContinental University and Colorado Technical University, which Operate mainly Online, Enrolled about 35,000 Students last year.
The Settlement requires Career Education to provide its Students with a Single-Page Disclosure clearly Describing their Program’s Expected Cost and the typical Student Loan Debt and Earnings of a Graduate. It must also Pay an Outside Monitor to Review its Compliance with various Consumer Protection Rules.
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