For-Profit Chain Cancels $494 Million in Student Debt to End State Investigations

In Education, Judiciary and Courts On

Nearly 180,000 former students at for-profit schools run by Career Education will not have to repay $494 million they owed to the company, a group of 49 state attorneys general announced Thursday.

The agreement to wipe out the debt held directly by Career Education, such as unpaid tuition, ended a five-year multistate investigation into complaints that the company used predatory and deceptive recruiting tactics.

Career Education misled students about the cost of its programs and its graduates’ job prospects, said Tom Miller, the attorney general of Iowa, whose office helped lead the states’ investigation. In some cases, Career Education charged students for vocational programs that lacked the accreditation needed for them to obtain a license and work in their field, according to the settlement documents.

Career Education, based in Schaumburg, Ill., denied any wrongdoing. Todd Nelson, the company’s chief executive, called the settlement an “important milestone” in its turnaround efforts. The company was once among the country’s largest for-profit education chains but has shrunk to about a third of its former size as state and federal regulators increased their scrutiny of the kind of vocational programs it runs.

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