AG Tells of Settlement with For-Profit Education Company; Debt Relief for Student Loan Borrowers

TRENTON – Attorney General Gurbir S. Grewal announced in a release Jan. 3 that for-profit education company Career Education Corp. has entered into a multi-state settlement to resolve allegations that the company engaged in unfair and deceptive recruiting and enrollment practices.
Under the settlement with Attorney General Grewal and 48 other state attorneys general, Career Education Corp. has agreed to reform its recruiting and enrollment practices and forgo collecting more than $493.7 million in debts owed by over 179,000 students nationally. More than 6,400 eligible students in New Jersey will receive relief totaling approximately $19.6 million.
Career Education Corp. is headquartered in Schaumburg, Ill., and has operated online and brick-and-mortar schools across the country, including American InterContinental University, Briarcliffe College, Brooks Institute, Brown College, Colorado Technical University, Harrington College of Design, International Academy of Design & Technology, Le Cordon Bleu, Missouri College and Sanford-Brown Colleges and Institutes. Currently, Career Education Corp. primarily offers online courses through American InterContinental University and Colorado Technical University.
Sanford-Brown Institute maintained a campus in Iselin, New Jersey. That school is now closed.
Launched in 2014, the multi-state investigation addressed allegations of a number of unfair and deceptive practices by Career Education Corp., including misleading statements or failures to disclose information about the total cost of enrollment, program offerings, transferability of credits, and job placement rates. As a result, some students could not obtain professional licensure and incurred debts that they could not repay or discharge.
Career Education Corp. denies the allegations of the attorneys general.
“When people put their time and money into career education programs, they should get what they pay for. Too often, for-profit colleges have sold false promises, leading students to take on significant debt without really improving their job prospects,” stated Grewal.
“Career Education Corp. was among the companies that put its own profits ahead of its students’ best interests. Today’s settlement helps right that wrong by securing debt relief for thousands of New Jersey residents who attended Career Education Corp. schools,” Grewal added.
Pursuant to the settlement, Career Education Corp. will forgo collection of debts owed to it by students who attended a Career Education Corp. school that closed before January 1, 2019, or whose final day of attendance at American InterContinental University or Colorado Technical University was on or before December 31, 2013.
In addition to its monetary terms, the multi-state settlement announced today requires among other things that Career Education Corp.:
    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.
    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.
    Not engage in deceptive or abusive recruiting practices and record online chats and telephone calls with prospective students.
    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.
In addition to debt relief for eligible students, the settlement provides for a $5 million payment to the participating states (with $50,000 going to New Jersey). The settlement also provides for retention of an administrator who will monitor Career Education Corp.’s practices for a period of three years and issue annual reports to the states.
The debt relief provided for in the settlement applies only to institutional loans – private loans offered by Career Education Corp. or its schools – not federal or state loans. Former students of Career Education Corp. schools who took out federal loans may choose to pursue debt relief from the U.S. Department of Education. Federal student loan borrowers can find additional information about loan forgiveness and cancellation here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation. General information about federal student loans is available on the Federal Student Aid website, at https://studentaid.ed.gov/sa/.
Deputy Attorneys General Monisha A. Kumar and Cathleen O’Donnell of the Division of Law’s Consumer Fraud Prosecution Section handled the Career Education Corp. matter on behalf of the State.