The nation’s second-largest for-profit university company was sued Monday by the Justice Department and four states for paying recruiters based on the number of students they signed up. The practice caused the company to enroll unqualified students, many of whom defaulted on their student loans, according to a government press release.
The company, Pittsburgh-based Education Management Corp., has received $11 billion in federal student aid loans and grants since 2003.
“This action against EDMC seeks to recover a portion of the $11 billion in federal student aid which EDMC allegedly obtained through false statements and which enriched the company, its shareholders and executives at the expense of innocent individuals seeking a quality education,” David J. Hickton, U.S. Attorney for the Western District of Pennsylvania, said in a prepared statement.
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The company admits it paid recruiters based partially on the number of students they enrolled, but argues that such a system is perfectly legal.
“The pursuit of this legal action by the federal government and a handful of states is flat-out wrong,” Bonnie Campbell, EDMC’s spokeswoman and a former Iowa attorney general, said in a press release. “Federal regulations issued in 2002 permitted companies to consider enrollments in admission officer compensation, so long as enrollments were not the sole factor considered.”
For-profit universities have come under fire in recent years for allegedly using high-pressure tactics to recruit students, many of whom are unprepared for higher education, into programs that are either unaccredited or poorly suited to prepare people for their intended careers. Many of those students drop out; others graduate but fail to find employment. Either way, some find it impossible to repay the government for their student loans, causing default rates to spike.
The Justice Department and the attorneys general of Indiana, Illinois, Florida and California joined the whistleblower suit, originally filed by Lynntoya Washington, a former EDMC recruiter, who alleged that the company violated federal recruiting laws and lid about it to regulators. The federal suit was filed in U.S. District Court of Western Pennsylvania, in Pittsburgh.
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