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January 3, 2019

ATTORNEY GENERAL MADIGAN REACHES $493.7 MILLION SETTLEMENT WITH FOR-PROFIT EDUCATION COMPANY

Career Education Corporation to Forgo Collecting Loans, Will Change Practices in Agreement with Madigan & 48 AGs

Chicago — Attorney General Lisa Madigan today announced for-profit education company Career Education Corp. (CEC) has agreed to reform its recruiting and enrollment practices and forgo collecting about $493.7 million in debts owed by 179,529 students nationally, in a settlement with her and 48 other attorneys general.

“CEC students in Illinois and across the country deserve this relief after the deception they endured as a result of CEC’s fraudulent actions,” Madigan said. “Today’s settlement ensures the company treats students the way they should have been all along – with honesty and respect for their futures.”

As part of the agreement, CEC agrees to forgo any and all efforts to collect amounts owed by former students living in the states participating in the agreement. In Illinois, 16,852 students will get relief totaling over $48 million, which is an average payment of about $2,850 per student. In addition, CEC has agreed to pay $5 million to the states, including over $250,000 to Illinois. Finally, a package of injunctive provisions will protect prospective Illinois students moving forward.

CEC is based in Schaumburg, Ill., and currently offers primarily online courses through American InterContinental University and Colorado Technical University. CEC has closed or phased out many of its schools over the past 10 years. Its brands have included Briarcliffe College, Brooks Institute, Brown College, Harrington College of Design, International Academy of Design & Technology, Le Cordon Bleu, Missouri College, and Sanford-Brown.

The agreement with CEC caps a seven-year investigation by Madigan that was spurred by student complaints and a critical report on for-profit education by the U.S. Senate’s Health, Education, Labor and Pensions Committee. A group of other attorneys general joined her in January 2014. That investigation revealed evidence demonstrating that:

  • CEC used emotionally charged language emphasizing the pain in prospective students’ lives to pressure them into enrolling in CEC’s schools;
  • CEC deceived students about the total costs of enrollment by instructing its admissions representatives to only inform prospective students about the cost per credit hour without disclosing the total number of required credit hours;
  • CEC misled students about the transferability of credits into CEC from other institutions and out of CEC to other institutions by promising on some occasions that credits would transfer;
  • CEC misrepresented the potential for students to obtain employment in the field by failing to adequately disclose the fact that certain programs lacked the necessary programmatic accreditation, which it knew would negatively affect a student’s ability to obtain a license or employment in the student’s field of study; and,
  • CEC deceived prospective students about the rate that graduates of CEC programs got a job in their field of study, thereby giving prospective students a distorted and inaccurate impression of CEC graduates’ employment outcomes. For instance, CEC inaccurately claimed that its graduates were “placed” who worked only temporarily or who were working in unrelated jobs.

As a result of the unfair and deceptive practices described above, students enrolled in CEC who would not have otherwise enrolled, could not obtain professional licensure, and were saddled with substantial debts that they could not repay nor discharge. CEC denied the allegations of Madigan and the other attorneys general but agreed to resolve the claims through this multistate settlement.

Highlights of the agreement
Under the agreement, CEC must:

  • Make no misrepresentations concerning accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits, or licensure requirements.
  • Not enroll students in programs that do not lead to state licensure when required for employment, or that due to their lack of accreditation, will not prepare graduates for jobs in their field. For certain programs that will prepare graduates for some but not all jobs, CEC will be required to disclose such to incoming students.
  • Provide a single-page disclosure to each student that includes: a) anticipated total direct cost; b) median debt for completers; c) programmatic cohort default rate; d) program completion rate; c) notice concerning transferability of credits; d) median earnings for completers; and e) the job placement rate.
  • Require students before enrolling to complete an Electronic Financial Impact Platform Disclosure, which provides specific information about debt burden and expected post-graduation income. CEC is working with the states to develop this platform.
  • Not engage in deceptive or abusive recruiting practices and record online chats and telephone calls with prospective students. CEC shall analyze these recordings to ensure compliance. CEC shall not contact students who indicate that they no longer wish to be contacted.
  • Require incoming undergraduate students with fewer than 24 credits to complete an orientation program before their first class that covers study skills, organization, literacy, financial skills, and computer competency. During the orientation period, students may withdraw at no cost.
  • Establish a risk-free trial period. All undergraduates who enter an online CEC program with fewer than 24 online credits shall be permitted to withdraw within 21 days of the beginning of the term without incurring any cost. All undergraduates who enter an on-ground CEC program shall be permitted to withdraw within seven days of the first day of class without incurring any cost.

Robert McKenna, former Washington state attorney general and current partner at the San Francisco-based law firm of Orrick, Herrington & Sutcliffe, will independently monitor the company’s settlement compliance for three years and issue annual reports.

Relief eligibility
CEC has agreed to forgo collection of debts owed to it by students who either attended a CEC institution that closed before Jan. 1, 2019, or whose final day of attendance at AIU or CTU occurred on or before Dec. 31, 2013.

Former students with debt relief eligibility questions can contact CEC.

The CEC investigation was led by Madigan and the attorneys general of Iowa, Connecticut, Kentucky, Maryland, Oregon and Pennsylvania. The agreement also covers the District of Columbia and the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

Madigan is a national leader in investigating and enforcing consumer protection violations in the higher education field. The Illinois Student Loan Bill of Rights drafted by Madigan's office took effect Monday, Dec. 31, 2018. It addresses widespread abuses and failures in the student loan industry revealed by thousands of student borrower complaints to Madigan’s office and verified by Madigan’s investigation into Navient, one of the country’s largest student loan servicing companies. The Student Loan Bill of Rights addresses these problems by requiring student loan servicers to properly process payments; by requiring specialists to provide and explain to struggling borrowers all of their repayment options, starting with income-driven plans; and through the creation of a Student Loan Ombudsman in Madigan’s office.

Madigan also operates a free Student Loan Helpline to provide student borrowers with resources about repayment options, avoiding default or how to file a complaint about loan servicing at (800) 455-2456 (TTY: 1-800-964-3013).

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