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SALT LAKE CITY — Some Utah students will have their school debt loads reduced following a national settlement with an Illinois-based education company that was involved in what the director of Utah's Division of Consumer Protection called "shady, troubling" business practices.
The Utah Division of Consumer Protection announced Wednesday the state will receive settlement funds for students from a nationwide lawsuit against Career Education Corp., a for-profit education company. In the court filing, the company agreed to reform its recruiting and enrollment practices and forgo collecting almost $494 million in debts owed by 179,529 students across the country — including nearly 400 Utahns.
The complaint was filed through the Utah Attorney General's Office in conjunction with 48 other attorneys general.
"The types of things that are alleged here are misrepresentations to students about very material things," explained Daniel O'Bannon, director of the Utah Division of Consumer Protection.
The five-year investigation uncovered numerous deceptive practices that were affecting students in Utah and across the country, he added.
As part of the settlement, the company agreed to forgo any and all efforts to collect amounts owed by former students living in the states participating in the agreement. In Utah, 399 students will get relief totaling $980,547. Nationally, the average individual debt relief will be approximately $2,750 per student.
Based in Schaumburg, Illinois, Career Education Corp. currently offers mostly online courses through American InterContinental University and Colorado Technical University.
The company has closed or phased out many of its schools over the past 10 years. 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.
A group of attorneys general launched an investigation in January 2014 following several complaints from students. Additionally, the U.S. Senate’s Health, Education, Labor and Pensions Committee released a report on for-profit education that revealed evidence demonstrating the company misrepresented the potential for students to obtain employment in their field by failing to adequately disclose the fact that certain programs lacked the necessary accreditation.
The types of things that are alleged here are misrepresentations to students about very material things.
–Daniel O'Bannon, Utah Division of Consumer Protection.
The report also found that the company "deceived prospective students about the rate that graduates of CEC programs found a job in their field of study, which gave prospective students a distorted and inaccurate impression of CEC graduates’ employment outcomes," a news release stated. Additionally, the company used "emotionally charged" language to pressure them into enrolling in their schools, "deceived students about the total costs of enrollment" and "misled students about the transferability" of school credits.
"These are not minor, collateral points," O'Bannon said. "These are the essence of what students want and need to know as they are going into an education program."
Career Education Corp. denied the allegations of the attorneys general but agreed to resolve the claims through the multistate settlement, the release stated. Under the agreement, the company must make no misrepresentations concerning accreditation, selectivity, graduation or placement rates, transferability of credit, financial aid, veterans’ benefits or licensure requirements.
The company must provide a single-page disclosure to each student that includes the anticipated total direct costs, the median debt amount for program completers, program cohort default rates, program completion rates, a notice concerning transferability of credits, median earnings for completers and job placement rates.
Before enrolling, students will be required to complete a financial impact disclosure that provides specific information about debt burden and expected post-graduation income. The company is working with the states to develop this platform, the release stated.
O'Bannon said most of the dubious practices were a result of the company trying to boost its bottom line.
"The idea is that if you get more students in the door, you're going to make more money," he said. "How do you get more people to come through the door? Tell them things that in this case are alleged not to have been true."
#Utah#Consumer Alert! @UtahCommerce and @UtahAG sign on to $493.7 M national settlement with Career Education Corporation, a for-profit school, which will bring $980K to 399 Beehive State students. Read more here; https://t.co/rrRtr4HPy0pic.twitter.com/2pMagRLAcc
— commerce.utah.gov (@UtahCommerce) January 9, 2019
Under the agreement, the company is required to have 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.
The company also has to establish a risk-free trial period that allows undergraduates who enter an on-ground program to withdraw within seven days of the first day of class without incurring any cost.
According to the release, Career Education Corporation agreed to forgo collection of debts owed by students who either attended a CEC institution that closed before Jan. 1, 2019, or whose final day of attendance at American InterContinental University or Colorado Technical University occurred on or before Dec. 31, 2013.
"We hope that this (settlement) sends a strong message to for-profit schools that regulators are watching," O'Bannon said. "Students needs accurate representations and proper disclosures to assess their options."
Former students with debt relief eligibility questions can contact the company via email at CECquestions@careered.com or by telephone toll-free at 844-783-8629.
