Education Management Payback Rate Tops Threshold

By Stouffer, Rick | Tribune-Review/Pittsburgh Tribune-Review, August 17, 2010 | Go to article overview

Education Management Payback Rate Tops Threshold


Stouffer, Rick, Tribune-Review/Pittsburgh Tribune-Review


Thirteen college campuses operated by Education Management Corp. have student loan repayment rates below a proposed Department of Education threshold of 35 percent, new government figures show.

The Pittsburgh-based, for-profit company's 101 campuses combined had an estimated repayment rate of 38 percent as of Sept. 30, the figures show.

The payback rate is important to for-profit postsecondary schools, according to the Education Department, which wants to tighten standards to make sure loans are being repaid. The newly proposed rules, known as the "gainful employment" regulations, are scheduled to go into effect in July.

Stocks of for-profit colleges plummeted Monday following the release last week of figures showing that nearly two-thirds of the schools' students did not repay federal loans, bolstering calls for stronger regulation of the industry.

For-profit colleges have been under fire in light of an Aug. 4 General Accountability Office report that found recruiters at 15 colleges misled students to boost enrollment. One of those was Argosy University in Chicago, operated by Education Management.

On Friday, Education Secretary Arne Duncan said he intends to beef up enforcement of repayment. Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, has held two hearings on for-profit colleges and has demanded information from 30 companies.

For-profits can rely on federal financial aid for as much as 90 percent of revenue. Federal grants and loans to students at for- profit colleges jumped to $26.5 billion in 2009 from $4.6 billion in 2000, according to the Education Department.

Late Friday, the department released figures on repayment rates for more than 8,000 for-profit, private and public colleges.

Nationally, for-profit colleges have a 36 percent student loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits, according to an analysis of the Education Department figures by the Institute for College Access & Success, an Oakland, Calif., nonprofit research group.

"We continue to believe the principal repayment test proposed by the department as part of the gainful employment regulation is not necessarily reflective of the ability of our former students to repay their federal student loans, the quality of the programs we offer, or the outcomes that our students achieve," Education Management CEO Todd Nelson said in a statement on Monday. …

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