Last Friday, for-profit college giant Education Management Corporation (EDMC) announced the sale of many of its campuses to the Dream Center Foundation. The acquisition would convert three of the corporation’s chains—the Art Institutes, Argosy University, and South University—into nonprofits. EDMC will retain ownership of the Brown Mackie chain, which is shutting down most of its campuses, and the 19 Art Institute campuses the corporation is in the process of shutting down.
EDMC’s conversion to nonprofit status raises critical questions, including how the corporation intends to ensure positive student outcomes once it is no longer subject to gainful employment regulations. EDMC has more than 130 programs that the federal government has found to burden graduates with unmanageable student loan debt—programs that will be subject to even less federal oversight once they have been sold to a nonprofit. EDMC’s compliance with federal requirements attached to the receipt of federal Title IV funds will be even more critical once the corporation is no longer subject to the “90-10 rule,” which prevents for-profit colleges from receiving more than 90 percent of their revenues from such funds.
Like the last-ditch sale of many Corinthian campuses as that company failed, this sale leaves failing schools with EDMC, while selling off assets that may still have value to a new entity that may disclaim liability for the acts of its predecessors. This type of transaction leaves former students struggling with unmanageable debt even more completely without recourse.
Less than a year ago, EDMC tried to sell the New England Institute of Art, an Art Institutes campus in Brookline, Massachusetts, to a university based in India. The deal was scuttled after the corporations failed to obtain state approval. As EDMC’s equity holders continue to try to divest themselves of these assets, regulators should demand assurances that whoever owns the schools will operate them in the interests of students.
The Project on Predatory Student Lending represents a group of former students who attended the EDMC-owned New England Institute of Art. In September, these former students demanded that the companies remedy the harms they had caused to students and their families. The Project and Public Justice are currently challenging the federal government’s refusal to provide documents shedding light on EDMC’s recruiting practices.