The Art Institutes, with their flagship college located in Pittsburgh, Pennsylvania was once an independent college with only one campus. The college was acquired in 1969 by the private investment entity Education Management Corporation (EDMC) also based in Pittsburgh, with the idea of increasing profits in mind.
Unfortunately, that profit has come at the expense of many former Art Institute students seeking higher education. Students of the for profit schools managed by Education Management Corp. are now struggling to pay back student loans for an education that many graduates feel wasn’t worth the expense when trying to find a job. This is even more disconcerting given that many alumni were promised to have an easy time finding employment during the high pressure recruitment pitch most were given.
Deceptive, illegal recruitment practices are just one of the reasons the Art Institute lawsuits came about. If you’ve transferred your credits (or tried to) I’m sure you already know the school wasn’t properly accredited for certain types of licensure even though students were told otherwise. Let’s dive a little deeper into the lawsuits and investigations filed by the US Department of Education and the US Department of Justice.
Firstly, EDMC and it’s partner company Dream Center Education Holdings, were the actual plaintiffs in all of the cases we’re about to cover. Let’s not forget that the Art Institutes remaining campuses are undergoing a change in ownership. They are currently owned by a non profit organization that’s restructuring the surviving Art Institute system. They shouldn’t be held accountable for the actions of their previous owners.
In 2007 two recruiters tasked with enrolling students alleged that their employer Education Management Corporation was illegally compensating recruiters by paying them based on the number of enrollments they originated. This type of incentive based compensation is federally illegal and violates rules put in place to prevent companies from enrolling under qualified students just to receive their guaranteed tuition from the government.
The allegations made by the EDMC recruiters resulted in a civil lawsuit filed by the Department of Justice in 2012. The Department of Justice’s federal lawsuit was opened on behalf of 11 states and Washington DC claiming that EDMC defrauded the government of 11 billion dollars in federal student aid. This suit was founded based on the notion that illegal incentive based compensation programs for recruiters enrolling students equated to defrauding the government. EDMC would have definitely folded if it had agreed to pay back the financial aid.
EDMC argued that during the period incentive based compensation was paid it was not violating any federal rules in place at the time. The Department of Justice responded by dropping that charge in May of 2012 but other charges against the corporation were allowed to persist.
In 2012 another lawsuit was formally imposed by a South University recruiter also employed by Education Management. The recruiter made allegations that EDMC was falsifying employment rates of graduates to entice new students to enroll. In 2013 Colorado Attorney General John Suthers filed a similar civil claim alleging that Argosy University, also owned by EDMC, was also manipulating employment stats to increase enrollment.
Colorado students attending Argosy had also filed complaints about the college’s psychology counseling program. Argosy students were being enrolled for the new psychology program despite the fact that EDMC didn’t have the proper accreditation. Recruiters intentionally deceived applicants telling them that EDMC was in the process of getting the proper accreditation from the American Psychology Society.
Students that completed the psychology course went for state licensure and quickly learned that their diplomas were useless. EDMC ultimately paid a $3.3 million settlement for deceptive marketing practices that violated state consumer protection laws. As a result of this lawsuit 66 students were refunded their tuition and the psychology program was cancelled.
All in all 39 state attorney generals became involved in the lawsuit on behalf of students. As a result of litigation the Department of Justice required Education Management Corporation to pay $95.5 million in restitution to be distributed to the victims of fraudulent recruitment behaviors. In addition, EDMC was ordered to pay back $102.9 million in high interest rate student loans borrowed from the company directly.
$102.9 million in student loan forgiveness may sound like a lot but it was distributed amongst 80,000 students that were affected. The average amount received in the settlement was roughly $1370 per student, hardly enough to make up for the deception. In most cases that’s less than a year’s worth of student loan payments.
So what can you do about your student debt? Luckily the Department of Education has set aside federal funds that are allocated for the student loan forgiveness program. There are several ways to qualify for loan forgiveness.
Complete the form to request a free consultation with a student loan professional.
If you enrolled in an Art Institute because of deceptive marketing that misled you to believe it would be easy to find employment, you may qualify for a borrower’s defense to repayment program. This program will get your entire federal student loan cancelled if approved.
Submitting a borrower’s defense to repayment application can be tricky as many past student of for profit colleges have found out. Since the government is willing to pick up the tab on your entire debt you will need a lot of supporting evidence. Any deceptive marketing materials whether they are printed, emailed or screenshots of communications with recruiters must be submitted along with your application.
It would be wise to hire a student loan professional to help you with your application. The Department of Education is so backlogged it takes nine to twelve months to even review a borrower’s defense application. If there are any errors or missing documentation in your application package, it is denied and you have to start the process over again. Securing the help of a professional will limit extended processing times due to errors.
Another debt forgiveness program Art Institute alumni may find useful is the closed school loan discharge program. School closing loan forgiveness was implemented for students that are affected by Art Institute campuses closing while enrolled.
If you were attending an Art Institute when they closed their doors you may qualify for a loan discharge. Again you will have to submit proof that you were actively enrolled within 120 days of the school closing. This can easily be done with transcripts. However, you will also have to prove that your campus closed their doors and did not provide a teach out program that allows actively enrolled students finish out their pursuit of higher learning.
Similar to the borrower’s defense to repayment don’t expect a fast reply from the DOE. I’ve heard stories from applicants that have waited more than a year to receive a verdict.
If you are having trouble making payments on your student loans and waiting a year for a response on a loan discharge will ruin your finances there are other measures that can be taken. If you don’t qualify for discharge of your loan because of fraudulent practices or school closures there are other programs available for debt relief.
If you fall under either aforementioned category it would be wise to investigate Income Driven Repayment (IDR) programs. IDR programs are also federally funded loan programs that allow borrowers to make more manageable monthly payments on student debt. In many instances borrowers may even qualify for a zero dollar monthly loan payment.
New payments are calculated and structured based on your personal financial situation, not the amount you borrowed for your student loans. If you do qualify for a zero payment obviously that does not pay off your balance. After satisfying your payment requirements during the life of the loan, even if that payment is zero, your balance will be forgiven by the Department of Education.
Why should you enroll in an income driven payment program instead of going into forbearance or deferment? Forbearance and deferment are temporary fixes to your problem. While they can be useful tools in postponing payments, they do have a definitive period that will eventually come to an end. Typically these periods only last 6 to 12 months.
With an income based payment structure your loan payments will directly reflect your income situation for the entire life of the loan. Every 12 months a new payment is calculated based on current annual earnings and how many people your money takes care of. Unlike the Internal Revenue Service that only allows you to claim spouses and children, the Department of Education will allow you to claim people in your household as “family size”, the DOE’s take on dependents.
Family size can include people in your household that directly benefit from your earnings but aren’t traditional dependents. This can include roommates, family members and even your boyfriend or girlfriend if co-habitating. The more people your earnings contribute to, the less money you’ll pay for your student loans.
In summary, there are quite a few remedies that Art Institute students can use even if unaffected by lawsuits or school closures. Income driven programs.
To find out what you may be qualified for please complete the student loan eligibility form above. We’ll review your personal situation and let you exactly what can be done to improve it.