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Angered alumni unsatisfied by EDMC settlement

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Andrew Russell | Trib Total Media
Stephen Harroun, 35, of Bethel Park, stands in front of a design piece of his at his home in Bethel Park, Wednesday, Dec. 9, 2015. Harroun is a former student of Pittsburgh Art Institutes who is angry about a recent $95 million settlement that provides little compensation for students. Harroun has managed to find a job and make his loan payments, but knows that many classmates have not been as fortunate and thinks the company should be held more accountable for its actions.

Mark Burkett doesn’t want anyone to know where he went to college.

He leaves the school off his resume when he applies for jobs. It is scrubbed from his LinkedIn profile.

Employers and graduate school admissions counselors don’t take the Art Institute of Pittsburgh seriously, he said.

Which is why he wants a refund.

“Would I love to have my money back? Yes, so I can start over,” said Burkett, 32, who racked up $80,000 in student loan debt for his bachelor’s degree in industrial design.

Burkett isn’t the only angry alumnus of schools owned by Education Management Corp., the Downtown-based operator of for-profit colleges that runs the Art Institutes, Argosy University, Brown Mackie College and South University. He is one of thousands of former students demanding that their loans be forgiven. More than 22,000 people have signed an online petition demanding the debts be cleared for students who attended Art Institutes between 2003 and 2011.

Alumni have protested outside of EDMC campuses and criticized the company on social media. Critics say the company got off cheap in a $95.5 million settlement of a federal lawsuit over allegations of illegal recruiting practices, money that will go to the federal and state coffers but not a dime for former students.

EDMC says it respects students’ rights to organize and is doing what it can to offer financial help with scholarships, grants and forgiving some of the loans it made to students.

But there’s nothing it can do on federal loans, said EDMC spokesman Bob Greenlee. Nor will it take responsibility for the amount students borrowed.

“We can’t limit the amount of debt a student chose to take on,” he said. “That’s their own decision.”

Former students say they were duped by the very same recruiting practices that were at the center of the lawsuit the company settled with the Justice Department and a dozen states.

At least three U.S. senators have joined calls to wipe out debts for EDMC students. The chances are slim that there will be any loan relief coming soon, given regulators’ reluctance to put the school out of business with more penalties, said Kevin Kinser, a professor who studies the for-profit college industry at State University of New York at Albany.

‘Slap on the wrist’

Former students say they know it will be an uphill battle, but they refuse to let the issue drop, saying it is bigger than themselves.

“It’s almost exactly like the bank scenario,” said Stephen Harroun, 35, a West Mifflin native who attended Art Institute of Pittsburgh from 2002 to 2005. “The banks get a slap on the wrist for the recession that we saw in 2008 while they were performing illegal practices. … Now, it’s the same scenario and nobody at these for-profit schools are going to be held responsible.”

The comparison to the foreclosure crisis is a stretch, Kinser said.

“There’s no assets to be forfeited here,” Kinser said. “The housing crisis, there was always a house. You can’t give back an education.”

Students will have a hard time in court proving their degree is worthless, he said. They can say that nobody is taking their degree seriously, but they still probably learned something during their time in school.

Students would have to prove that they were somehow lied to — about graduation rates, accreditation or the actual cost of the education.

Federal prosecutors say they were unable to find that evidence. Their case focused not on lies told to students, but rather that the school paid recruiters according to the number of students they enrolled, a violation of federal law. In the settlement, the school never even acknowledged guilt.

“What was found, it was not a misrepresentation to students,” Secretary of Education Arne Duncan said during a press conference last month announcing the settlement.

It’s also uncertain whether federal watchdogs will defend students. In October, the Consumer Financial Protection Bureau won a $530 million lawsuit against for-profit Corinthian Colleges, which it accused of steering students into predatory loans. That is money it won’t be able to collect. Corinthian filed for bankruptcy in May and its assets had already been distributed to its debt holders, leaving it with nothing left to pay the settlement.

A CFPB spokesperson declined to say whether the bureau planned to investigate EDMC on similar complaints.

‘Profoundly dissatisfied’

Keeping EDMC viable was a concern for federal prosecutors. The lawsuit sought to reclaim a portion of $11 billion in federal student aid that EDMC received. If it sought even half that amount, it likely would have forced the company into bankruptcy, leaving the government with nothing and students in educational limbo. Even with the $95.5 million, the government is giving EDMC seven years to pay it back.

“An important part of the settlement was factoring in the company’s ability to pay,” U.S. Attorney General Loretta Lynch said.

EDMC agreed to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students, amounting to less than $1,300 per person. But that only applies to loans given by EDMC, not the federal or other private loans that are the bulk of most students’ financial aid.

Three Democratic U.S. senators recently asked the Education Department to forgive the federal loan debt for EDMC students. In a Nov. 30 letter to Duncan and Lynch, the senators — Elizabeth Warren of Massachusetts, Richard Durbin of Illinois and Richard Blumenthal of Connecticut — said they were “profoundly dissatisfied” with the EDMC settlement because it did not hold executives accountable or do enough to help students.

“We urge the Education Department to use its authority and all available evidence of EDMC’s fraudulent behavior to provide these students the full, immediate debt relief afforded by the law,” they said.

Education Department spokeswoman Dorie Nolt said the Department looked forward to meeting with the senators and was still open to hearing evidence of fraud against students.

“The Department is ready to act on any evidence of wrong-doing against individual students,” she said.

Still fighting

Current students say they are aware of the controversy, but not discouraged by it.

Hayley Stewart, who is working on her bachelor’s degree in fashion design at Art Institute of Pittsburgh, said she heard of the lawsuit before she enrolled in 2013.

Still, she chose the Art Institute over other schools because the school’s faculty had more experience in the fashion industry. Her biggest concern is ensuring that, amid cost cutting at EDMC — which has included layoffs and school closures — her teachers are spared.

“The main thing that concerns the students is losing faculty,” she said.

She also wants her school to remain open. EDMC has moved to close a quarter of its Art Institute campuses in the next few years, although Art Institute of Pittsburgh is not one of them.

If it were to close before she graduated, her federal loans would be forgiven. That’s not the case for the school’s alumni, who must still repay their loans.

Burkett wouldn’t mind seeing his alma mater close. The degree, he said, is no use to him anyway.

Burkett says he overpaid for his education. He says he was misled about the school’s program quality and the amount that his education ultimately would cost. He wants his money back. He thinks he can get it.

“I’ve got to be optimistic. That’s how I am,” he said. “I still believe that there’s going to be some justice. We’re still fighting.”

Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or cfleisher@tribweb.com.

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