AG Racine Announces Career Education Corp. Will Provide $2 Million in Debt Relief to District Student Borrowers Over Deceptive Recruiting

Settlement Requires For-Profit College Company to Provide $490+ Million in Relief to 48 States, Reform Harmful Recruitment Practices

WASHINGTON, D.C.Attorney General Karl A. Racine and the attorneys general of 48 states announced a settlement with Career Education Corporation (CEC) – a for-profit college company – resolving allegations over deceptive recruiting and other illegal practices. The settlement will provide nearly $500 million in debt relief to former students across the country, including $2 million in debt relief for 484 District residents. As part of the agreement, which caps a five-year investigation into the company, CEC will reform its recruiting and enrollment practices and will forgo collecting more than $493.7 million in debts owed by 195,136 students nationally. District consumers who were harmed will each receive on average more than $4,100 in debt relief. CEC will also make a payment of $5 million to the states, which will include $75,000 to the District.

“CEC misled prospective and current students about its educational programs and inflated its job placement rates, leaving them saddled with school debt and no way to pay it off,” said AG Racine. “This settlement brings much needed relief to our residents and is a warning that we will pursue action against other predatory for-profit colleges that lure students into debt with false promises of lucrative future careers.”

CEC is based in Schaumburg, Illinois, and currently offers primarily online courses through American InterContinental University (AIU) and Colorado Technical University (CTU). CEC has closed or phased out many of its schools over the past 10 years, and its past school 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 into CEC in January 2014 after receiving several complaints from students and a critical report on for-profit education by the U.S. Senate’s Health, Education, Labor and Pensions Committee. The investigation found evidence that CEC:

  • Misled prospective students about the costs and benefits of their courses of study: The attorneys general allege that CEC pressured its employees to enroll students and that, as a result, employees made misleading statements to students on total costs, transferability of credits, program offerings, job placement rates, and other topics.
     
  • Failed to disclose important information about costs, credit transferability and other information to prospective students: The investigation also uncovered evidence that CEC employees failed to disclose crucial information to prospective students on costs, credit transferability, job placement and other topics. 

As a result, some students could not obtain professional licensure and incurred debts that they could neither repay nor discharge. 

Settlement Agreement
The agreement resolves allegations that CEC’s deceptive recruiting and other harmful practices violated state consumer protection laws, including the District’s Consumer Protection Procedures Act. Under the agreement, CEC must provide $556.5 million in debt relief across the country. Other highlights of the agreement include requirements that CEC:

  • Provide $2 million in debt relief to District residents: As part of the more than $550 million in debt relief nationwide, CEC must provide $2 million in debt relief to 484 consumers in the District who incurred debt to pay tuition at CEC institutions.
     
  • Stop making misrepresentations to prospective students: CEC must stop making misrepresentations in recruitment efforts regarding accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits, or licensure requirements.
     
  • Stop enrolling students in courses that do not prepare graduates: CEC must stop enrolling 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 one-page disclosure to each student about educational costs and outcomes: CEC must provide a disclosure one-pager to students that includes: a) anticipated total direct cost to the student of a course of study; b) the median debt for CEC students who complete that course of study; c) the loan-default rate for other students in that program; d) the completion rate for that program; c) information on the transferability of credits for that program; d) median earnings for students who complete that program; and e) the job placement rate for students who complete that program.
     
  • Monitor online and telephone recruiting practices: CEC must not engage in deceptive or abusive recruiting practices and will have to record online chats and telephone calls with prospective students. CEC will then analyze these recordings to ensure compliance.
     
  • Establish a risk-free trial period: CEC must permit all undergraduate students who enter an online CEC program with fewer than 24 online credits to withdraw within 21 days of the beginning of the term without incurring any cost. CEC also must allow all undergraduate students who take CEC classes in person to withdraw within seven days of the first day of class without incurring any cost.
     
  • Be monitored independently for three years: 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.
     
  • Pay $5 million to the states: CEC must make a payment of $5 million to the participating states and the District. The District’s share will be $75,000. 

Relief Eligibility
CEC has 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 AIU or CTU occurred on or before Dec. 31, 2013. Former students with debt relief eligibility questions can contact CEC by phone at 844-783-8629 (Local: 847-783-8629), by email at CECquestions@careered.com, or by submitting an online form.

The Assurance of Voluntary Compliance outlining the terms of the settlement is available at: http://oag.dc.gov/sites/default/files/2019-01/CEC-AVC-Final.pdf

Online Student Loan Resources for District Residents
Student borrowers who are struggling with student loans can access free resources about repayment options and how to manage student loan debt at the Office of the Attorney General’s Student Loan Resource Page, including tips on how to avoid student loan scams.

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