The Project on Predatory Student Lending at Harvard Law School is suing the Justice Department for withholding documents that could help for-profit college students get their federal education loans canceled.
The lawsuit stems from a 2015 settlement between the Justice Department and Education Management Corp., the operator of for-profit schools Art Institutes, Argosy University, Brown Mackie College and South University. The company agreed to pay $95.5 million to resolve allegations that it paid employees based on student enrollment in violation of a federal ban on incentive compensation at schools in the federal financial aid programs.
Although a coalition of states involved in the deal got Education Management to forgive $103 million in outstanding student balances, the settlement did nothing to grant federal loan cancellation. As a result, people who attended Education Management schools have been filing “borrower defense to repayment” claims, which wipe away federal debt when schools use illegal or deceptive tactics to persuade students to borrow money for college.
Attorneys at the Harvard Law clinic say the evidence the Justice Department gathered, specifically recruitment documents, could make it easier for those students to have their claims approved. They filed a Freedom of Information Act request last year seeking access to the files but were told by the Justice Department that there was a court order preventing the release. The Harvard attorneys asked the courts to clarify and said federal prosecutors then changed their position by claiming the information was not subject to the FOIA law.
“When the government settled this case, they hailed it as a victory for students and taxpayers. We are seeking these documents on behalf of students, but also on behalf of taxpayers who are the members of the public who have an interest in these documents,” said project attorney Amanda Savage. “There has to be oversight of how public dollars are being funneled toward for-profit corporations.”
Justice officials did not immediately respond to requests for comment.
In its case against Education Management, the Justice Department said the company flouted the incentive compensation ban by paying recruiters based on the number of students enrolled, leading employees to use aggressive and deceptive tactics to get students in the doors. Top recruiters received Pittsburgh Pirates tickets, free lunches and all-expenses-paid vacations to Las Vegas and Puerto Vallarta, according to the complaint.
Still, Education Management swore to the Education Department that it was complying with the rules. Between July 2003 and June 2011, about 90 percent of the tuition the company received, or $11 billion, came from federal grants and loans.
Troubles at Education Management came to light in 2007 when Lynntoya Washington, a former assistant director of admission at the Art Institute of Pittsburgh Online Division, sued the company under the False Claims Act. The law encourages witnesses to come forward in cases where the government has been defrauded by providing them up to a third of the proceeds recovered by authorities.
State and federal authorities joined Washington’s case in 2011, shortly after another whistleblower, Michael T. Mahoney, the director of the company’s online higher education division, came forward with more evidence of misconduct.