On January 3, 49 state attorneys general announced a settlement with Career Education Corporation (“CEC”), a for-profit education company, to resolve claims that CEC engaged in unfair and deceptive practices. The settlement requires CEC to forgo any collection efforts against $493.7 million in outstanding loan debt held by nearly 180,000 former students. It also imposes a $5 million fine on the company. California was the only state not participating.

CEC operates online courses through American InterContinental University and Colorado Technical University. CEC’s other brands include Briarcliffe College, Brooks Institute, Brown College, Harrington College of Design, International Academy of Design & Technology, Le Cordon Bleu, Missouri College, and Sanford-Brown. According to the attorneys general, CEC used “emotionally-charged language” emphasizing the pain in prospective students’ lives to encourage them to enroll in CEC’s schools, deceived students regarding the total costs of enrollment, misled students about the transferability of their earned credits, misrepresented job prospects for graduates, and deceived prospective students about post-graduation employment rates. The attorneys general contended that students who enrolled in CEC classes incurred substantial debts that they could not repay or discharge, when they otherwise would not have done so absent the misrepresentations. CEC denied the allegations, but entered into the settlement agreement to resolve the AGs’ claims.

The settlement agreement requires CEC to make improved disclosures to students, including anticipated total direct costs, median debt for completion of CEC’s programs, program default rates, program completion rates, transferability of credits, median earnings for graduates, and job placement rates. CEC must also improve students’ ability to cancel their enrollment, allowing students no fewer than seven days to cancel and receive a full refund, and up to 21 days for students with fewer than 24 credits from online programs. In addition, the AGs are requiring CEC to inform all qualifying former students that they no longer owe money to CEC.

The investigation was led by the Maryland Attorney General’s Office. “CEC’s unscrupulous recruitment and enrollment practices caused considerable harm to Maryland students,” said Maryland Attorney General Brian Frosh. “The company misled students. It claimed that students would get better jobs and earn more money, but its substandard programs failed to deliver on those promises. The school encouraged these students to obtain millions of dollars in loans, placing them at great financial risk. Now CEC will have to change its practices and forgo collection on those loans.”

A copy of the settlement agreement is available here