Stephanie Saul reports in the New York Times that a major for-profit “college” is expected to pay $90 million in fines for illegal recruiting practices. The corporation is partly owned by Goldman Sachs. As the story reports, the chain has collected more than $11 billion in federal aid for students (who get a lousy education: my view). These for-profit colleges make huge profits and deliver a poor education, leaving students with big debts. I will vote for any candidates who promises to cut off federal aid to for-profit colleges and  universities. They always escape unscathed, because they hire the best lobbyists from both parties.

 

The nation’s second-largest for-profit college operator, Education Management Corporation, is expected to agree to pay nearly $90 million to settle a case accusing it of compensating employees based on how many students they enrolled, encouraging hyperaggressive boiler room tactics to increase revenue.

 

 

The civil settlement, the largest ever involving false claims made to the Department of Education, is expected to be announced in Washington on Monday. The case against the school was initially brought by whistle-blowers and joined by the Department of Justice and several states in August 2011.

 

Education Management could not be reached for comment.

 

The settlement would resolve accusations against the company under the consumer protection laws of 39 states and the District of Columbia. Two whistle-blowers, former Education Management employees whose complaints initiated the suit, are also set to receive some of the proceeds.

 

 

Students waited at an Everest campus in Industry, Calif., last week, hoping to get their transcripts and find out whether their loans could be forgiven.For-Profit Colleges Face a Loan Revolt by Thousands Claiming TrickeryMAY 3, 2015
New Federal Standard for Aid to For-Profit Colleges Draws CriticismOCT. 30, 2014
Education Management Corporation Accused of Widespread FraudAUG. 8, 2011

 

It was not known whether Education Management, which is based in Pittsburgh, would acknowledge wrongdoing. The company operates online and at brick-and-mortar locations in 32 states and Canada under the names the Art Institute, Argosy University, Brown Mackie College and South University.

 

The company was accused of violating a federal ban on per capita incentive compensation at institutions that participate in federal student financial aid programs. The ban was designed to prevent the enrollment of unqualified students.

 

About 90 percent of the tuition money the company collected at the four school systems — or $11 billion between July 2003 and June 2011 — came from federal aid, including subsidized loans and Pell grants to help low-income students obtain college educations, according to the accusations. The case said the revenue had been the result of the fraud.

 

Had the suit gone to trial, a verdict against the company could have reached into the billions. The government was believed to have accepted a lower settlement because of the financial difficulties of Education Management, part of which is owned by Goldman Sachs.

 

The case cast a pall over the for-profit college industry and was among the factors leading to declining enrollment at for-profit colleges. Since the lawsuit’s announcement, the company’s price per share has dropped to 8 cents from about $22.