A company that owns two national for-profit college chains said Thursday that it will erase nearly $500 million in debt incurred by former students as part of a settlement with 48 states and the District of Columbia.
The deal with Career Education Corporation will resolve allegations that it lied about job placement rates and misled potential students to get them to enroll. State attorneys general began investigating the company in 2014 following complaints from students and a damning report by the U.S. Senate.
Company officials on Thursday said they deny any wrongdoing but called the settlement an "important milestone."
"We have remained steadfast in our belief that we can work with the attorneys general to demonstrate the quality of our institutions and our commitment to students," Todd Nelson, the company's CEO, said in a statement.
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Based in Schaumburg, Illinois, the company enrolls about 34,000 students across two chains, Colorado Technical University and American InterContinental University. More than 90 percent of its students are enrolled through online courses, according to the company.
The deal was signed by every state except California, which is negotiating a separate agreement of its own, and New York, which previously settled with the company.
Of the $493 million in debt being wiped out, the greatest share comes from borrowers in Florida, which will get $68 million in relief, followed by Texas, with $51 million. The debt stems from institutional loans the company issued to students.
Other terms of the deal require the company to pay $5 million to states to cover the cost of their investigations, and the company will now be required to give all prospective students a single-page disclosure with information including job placement rates, anticipated costs and the average earnings of graduates.
State attorneys general called the agreement a victory for students, saying it will provide debt relief to more than 179,000 borrowers across the country. In Illinois, where $48 million will be cleared, Attorney General Lisa Madigan said it's a fair outcome for students who were deceived by the company's schools.
"Today's settlement ensures the company treats students the way they should have been all along — with honesty and respect for their futures," Madigan said.
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At its peak, Career Education Corporation ranked among the largest for-profit college companies in the nation, enrolling more than 100,000 students at several chains including Sanford-Brown College and Le Cordon Bleu, a group of culinary schools.
But after years of government scrutiny and deep enrollment declines, the company announced in 2015 it would begin closing or selling most of its schools.
Aside from the state investigations, the company has also been the subject of a Federal Trade Commission inquiry since 2015, according to company records filed in September with the U.S. Securities and Exchange Commission. The FTC has been examining potential deception in advertising, according to the company, which says it is cooperating with the inquiry.
The for-profit college industry faced a heavy crackdown under President Barack Obama but has seen a shift in its favor under President Donald Trump. Over the last two years, Education Secretary Betsy DeVos has sought to loosen regulation and reverse policies created under the previous administration.
But the sector has come under renewed scrutiny in recent weeks following the abrupt closure of Education Corporation of America, which was one of the nation's largest chains before it collapsed amid deep financial trouble. Democrats have cited the closure as evidence that the industry needs sharper oversight.