Arizona's Settlement With For-Profit College Operator to Erase $22 Million in Debt

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Over 6,000 eligible Arizonans who attended colleges run by the for-profit operator Career Education Corp. will have their loan debt held by the school erased, to the tune of more than $22 million.

On Thursday, the office of Arizona Attorney General Mark Brnovich announced the settlement, the result of an inquiry by 47 other states and the District of Columbia. The for-profit education company will forgo collecting nearly $500 million in debt owed by students nationwide, per the settlement, Brnovich's office said.

The debt-relief provision of the settlement doesn't apply to federal loans or loans held by parties other than CEC, however. 

CEC deceived students in a variety of ways, Brnovich said, including misleading prospective students about program accreditation and the transfer of credits. The company also distorted job placement rates for graduates, Brnovich said – the school claimed that some graduates got a job in their field of study, when in reality they worked just temporarily or got an unrelated job.

"We've secured $22 million in debt relief for Arizonans that will help thousands of students who were saddled with large debts and degrees that were less useful than CEC led its students to believe," Brnovich said in a statement.

CEC, like other for-profit operators, had seen its fortunes contract amid regulatory scrutiny and turmoil during the Obama administration. In 2015, CEC announced that it would close or sell most of its programs, Inside Higher Ed reported, leaving the for-profit chain with just two remaining schools: American InterContinental University and Colorado Technical University.

Students who attended American InterContinental and Colorado Technical before the end of 2013 can have their debts relieved. So can any students who attended a closed CEC school before January 1, 2019.

Other defunct universities formerly operated by CEC include Briarcliffe College, Brooks Institute, Le Cordon Bleu, Collins College, and Sanford-Brown Colleges and Institutes.

Collins and Sanford-Brown both operated schools located in Phoenix before they closed. Le Cordon Bleu's culinary arts location in Scottsdale closed in 2017.

Arizona Attorney General Mark Brnovich announced a multimillion-dollar settlement with a for-profit university operator.EXPAND
Arizona Attorney General Mark Brnovich announced a multimillion-dollar settlement with a for-profit university operator.

In a statement, the company downplayed the significance of the settlement.

CEO Todd Nelson described the resolution of the inquiry by the attorneys general as "an important milestone for the Company that coincides with the completion last month of a multi-year process of teaching out and closing our transitional campuses.”

Most of the debt relief required under the settlement was already "written-off in prior reporting periods in the ordinary course of the Company’s operations," CEC said in the statement. The company expects to pay just $1.3 million in debt relief.

An independent administrator will oversee reform of the company's recruiting practices for the next three years under the terms of the settlement, according to Brnovich's office. CEC will have to provide accurate information to prospective students about the financial impact of the company's programs and the likelihood of job placement after graduation.

"This settlement will not only help ensure for-profit colleges better represent the truth to prospective students in the future, but it also contains injunctive relief that will help students make better-informed choices moving forward," Brnovich said in the release.

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