The Art Institutes have suffered numerous setbacks causing them to close over 80% of their campuses affecting thousands of actively enrolled students. This left alumni to deal with a massive amount of issues surrounding their pursuit of higher education. Currently enrolled students have been left wondering if their campus will close next.
The original Art Institute opened in 1921 in Pittsburgh, Pennsylvania. The college was acquired in 1969 with the intention of opening multiple campuses. New locations were opened in the late 1960s and flourished during the early 2000s expanding campuses to over 50 locations in the art Institute system throughout the United States.
Art Institutes also opened their virtual doors to online students increasing enrollment. Students were able to pursue individual courses for certifications or earn their associates, bachelors or masters degree in fields such as graphic design, photography, interior design, fashion and the culinary arts just to name a few.
The original owners and operators of the for profit college chain, Education Management Corporation (EDMC) and partner parent Dream Center Education Holdings (DCEH), had a different vision for the college when they started expansion. They turned a college geared towards educating people in creative fields into a money making machine. EDMC launched as an IPO on the NASDAQ stock exchange in 2009 at a price of $18 per share. In as little as 5 years EDMC was delisted from the stock exchange and their stocks fell to under a penny per share.
So what caused one of the largest education corporations in America to fail so miserably? There are a lot of factors that went into the demise of the education giant.
In 2011 the television series Frontline aired an episode about a military veteran trying to further his education at an Art Institute learning facility. The episode depicted the school as predatory. The show claimed that AI enrolled under qualified students from the military and other recipients of federal loans simply because the tuition was guaranteed to be paid by the government.
The veteran featured in the episode essentially equated his diploma to a piece of toilet paper. He stated that his education was useless because of the lack of employment in the fields he studied despite the school touting low unemployment rates among their graduates.
Following the airing of the television show, which also outed other for profit colleges, enrollment dropped by over twenty percent in the anteceding year. This defamatory TV show coincided with an economic recession and a change in lending guidelines that made it harder to acquire student financing using parents as cosigners.
In 2012 and 2013 EDMC fell short of expected earnings causing their president of 27 years, John Mazzoni, to resign from his position. In an effort to increase enrollments EDMC decided to freeze tuition hikes for a period of three years in hopes that a stable tuition would attract new students. Unfortunately, the promotion didn’t do much to downplay the shady “diploma mill” they were running.
The veteran featured in the Frontline series wasn’t the only student claiming he was the victim of predatory lending and deceptive business practices that violated both consumer laws and federal laws. In 2014 the Department of Education announced that it was imposing heightened cash monitoring of EDMC and it’s subsidiaries. Monitoring was to include several Art Institute locations and even their flagship location in Pittsburgh.
The monitoring of cash on hand is meant to ensure that if a school closes their doors to enrolled students that it has enough money to cover outstanding student loans that it may have to repay. Cash on hand would also have to satisfy “teach out” programs that allow enrolled students to complete their course work.
Since the launch of the investigation in 2014 the Department of Justice has also conducted their own investigations. The findings of their investigation concluded that not only was the for profit college company enrolling under qualified students in an attempt to maximize profit but they were also fraudulently inflating the employment figures of past graduates. The Department of Justice also alleged that the companies running AI schools illegally received over 11 billion dollars in federal and state financial aid.
A government stipend was set aside to aid former students with the pursuit of debt cancellation through DCEH. Marc Dottore, the man designated to oversee Dream Center Education Holdings during this process, has reported to the Department of Education that roughly 13 million dollars of the federal funds appropriated has gone missing. Now facing bankruptcy DCEH is selling it’s remaining AI, Argos and South University campuses to keep remaining schools opened. They were granted a court appointed receiver in January 2019 to do so.
The new owner looks to be a non profit organization backed by private investors by the name of Education Principle Foundation. They intend to keep the campuses they purchased open to students.
We have compiled an up to date list of Art Institutes that have closed in an effort to help keep alumni and enrolled students informed. If you were affected by one of the Art Institute campus closings below, you may want to continue to read this article.
The Department of Education has programs in place that are specific to students affected by school closures. A school closing discharge is very different from a borrower’s defense to repayment in that it doesn’t pertain to any class action lawsuits or litigation.
School closing forgiveness programs were put in place for schools that closed without the cash on hand for tuition refunds or to complete teach outs. The term “teach out” is used when schools close their doors to new enrollments but keep their doors open to existing students so they can complete their education. If you had the opportunity to complete the education you paid for, then you don’t qualify for a school closure discharge.
If you were actively attending a campus that closed and did not give you the chance to finish your education you may qualify. Technically, if this is the case, you are qualified but you’ll have to jump through some hoops to get the discharge approved.
As a borrower, the burden of proof is on you. You will need to file an application with the Department of Education and provide supporting documentation to plead your case.
Firstly, knowing the exact date of your school closure is important. The DOE will only approve students that were actively enrolled within 120 days of the school closing. This can be proven with your transcript records.
Secondly, to my knowledge all of the campuses held teach out programs so that enrolled students can finish school (and so AI didn’t have to refund tuition). If for some reason your campus did not allow students to attend the rest of the schooling they paid for, you’ll need to provide documentation as to why that campus did not participate in the teach out program. This documentation can include written communications from the school received in the mail or via email.
Finally, if you were enrolled during the closing and you just decided not to take part in the teach out… you aren’t going to get approved. If you had health issues, family matters to tend to or any other reason for not attending school while AI was still trying to fulfill their end of the bargain, the DOE will certainly deny your request.
Much like you would hire an accountant to file your taxes, it’s best to involve a professional when there is so much money at stake. Making mistakes on your application can cause delays in the process or even get you denied when you qualify for approval.
Make sure you have the documentation to support your claim at the ready before calling a pro. Be prepared to answer a few questions about your income, occupation and family when going through the application process. A knowledgeable professional will ask these questions so they can determine eligibility for all forgiveness programs that may be available to you. It’s always good to have a back up plan just in case the DOE doesn’t approve your application based on the school closure.
When dealing with the Department of Education or any government entity for that matter, don’t expect changes to happen immediately. This is especially true when applying for a school closure loan forgiveness program because all of your documentation supporting your attendance dates are reviewed by a live person.
If you’ve ever dealt with the DOE you already know they are severely understaffed. They have 4000 employees overseeing the entire college educational system. That’s thousands of US colleges and hundreds of thousands of alumni to manage on a daily basis. That’s another reason I recommend using a professional to help prepare your documents. You don’t want to get denied and wind up back on the bottom of the pile.