Education Management Corporation
 | |
| Company type | Public |
|---|---|
| Nasdaq: EDMC | |
| Industry | For-profit education |
| Founded | 1962 |
| Defunct | 2018 |
| Fate | Declared bankruptcy; acquired by Dream Center |
| Headquarters | , United States |
Number of locations | 110 campuses |
Area served | United States, Canada |
Key people |
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| Website | www |
Education Management Corporation (EDMC) was a for-profit post-secondary education provider headquartered in Pittsburgh, Pennsylvania, operating institutions across the United States and Canada. Established in 1962, the company reached its peak in 2011 with 110 campuses under its umbrella, including divisions such as Argosy University, The Art Institutes, Brown Mackie College, and South University, collectively serving approximately 158,300 students.
Between 2013 and 2017, EDMC faced significant challenges including enrollment declines, legal disputes, and accreditation difficulties, leading to the sale or closure of numerous campuses. By 2014, the company’s stock value had plummeted by 99.9%, accompanied by a downgrade of its bond rating to junk status. Moody's further reduced EDMC’s credit rating to D-PD in January 2015.
In June 2018, EDMC filed for Chapter 7 bankruptcy protection and initiated asset liquidation.
Funding and expenses
Approximately 80% of Education Management Corporation’s revenue originated from U.S. federal government sources, including Title IV programs administered by the Department of Education (such as Pell Grants and federal student loans), as well as funds from the Department of Defense and Veterans Administration. In 2009, the company allocated $435 million (21.6% of revenue) toward marketing and student recruitment efforts, while generating $319 million (16% of revenue) in profit. From 2010 through 2015, EDMC invested over $500,000 annually in lobbying activities.
Programs
EDMC’s portfolio comprised four primary educational brands: Argosy University, The Art Institutes, Brown Mackie College, and South University. Additionally, it owned Western State University College of Law. Its academic offerings included doctoral, master's, bachelor's, associate degrees, as well as certificate programs.
As of January 2013, EDMC operated a total of 110 institutions distributed across 32 states within the U.S. and also in Canada.
Colleges and universities
Argosy University became part of EDMC in July 2001 following the acquisition of Argosy Education Group. The Argosy campuses were divested to the Dream Center in 2017 and subsequently ceased operations by March 2019.
The Art Institutes maintained roughly 50 campuses throughout the United States and Canada specializing in disciplines such as design, fashion, media arts, and culinary studies. These schools were sold to the Dream Center Foundation in 2017. By August 2019, eight campuses continued independently under the Education Principle Foundation. All remaining Art Institute locations were closed by September 30, 2023.
Brown Mackie College offered associate’s and bachelor’s degrees primarily focused on health sciences, business administration, legal studies, information technology, and design technology alongside diploma and certificate courses. In 2012 it operated 28 campuses; however, by June 2016 twenty-two out of twenty-six campuses had been shut down. The remaining three were sold to Ross Medical Education Center in 2017.
South University, a for-profit institution headquartered in Savannah, Georgia with multiple campuses across six states, was acquired by EDMC in 2003 before being sold to the Dream Center in 2017.
Establishment and Initial Years
EDMC was founded in Pennsylvania in 1962 and acquired its first school, the Art Institute of Pittsburgh, which had been established nearly half a century earlier, in 1969. In June 1986, a recapitalization led by Robert Knutson and Merrill Lynch Capital Partners resulted in the buyout of co-CEO Richard Royston when the company managed eight Art Institutes. The company went public in October 1996 through an IPO that raised $45 million. By 1998, EDMC was providing education to 17,400 students across 15 Art Institutes and three other institutions.
Growth in the 2000s
In July 2001, EDMC expanded by acquiring Argosy Education Group, based in Chicago, for $78 million, thereby broadening its offerings to include law, education, and business programs. Two years later, it purchased South University along with 18 schools from Ohio-based American Education Centers, which were later renamed Brown Mackie College. Former Maine governor John McKernan Jr. assumed the role of CEO in September 2003 and guided the company through acquisitions, campus expansions, and the launch of online programs.
A significant leveraged buyout took place in March 2006 when Goldman Sachs, Providence Equity Partners, and Leeds Equity Partners purchased EDMC and its 70 schools for $3.4 billion—the largest deal in the for-profit education sector at that time. At acquisition, the institution served approximately 72,000 students, including around 4,000 enrolled online. The influx of capital accelerated online enrollment growth to over 40,000 by the end of the decade, supported by regulatory adjustments that expanded federal loan eligibility for online courses.
Todd S. Nelson, previously CEO of Apollo Education Group, was appointed EDMC’s CEO in 2007 and became chairman in 2012. On September 21, 2009, EDMC re-entered public markets with a NASDAQ IPO that raised $330 million; Goldman Sachs retained a 40% ownership stake.
Between 2007 and 2012, online student enrollment rose dramatically from 7,900 to 42,300, fueled by marketing expenses that surpassed educational spending per student ($4,158 compared to $3,460). However, enrollment later declined sharply alongside significant reductions in workforce within the online division.
Recent Developments
In 2011, EDMC and its subsidiary Art Institutes came under scrutiny following the Frontline documentary Educating Sergeant Pantzke, which exposed deficiencies in disability services. Iraq war veteran Chris Pantzke publicly questioned both the value of his degree and the use of his GI Bill benefits.
Edward West succeeded Todd Nelson as CEO in 2012 while Nelson transitioned to chairman. Enrollment numbers fell from roughly 160,000 students in 2011 to about 130,000 by late 2012 due to economic downturns from the late-2000s recession and new federal restrictions on the PLUS Loan program. This decline, coupled with impending changes to the U.S. Department of Education's "gainful employment" regulations, prompted EDMC to halt expansion efforts and implement layoffs during 2012. Only one new campus opened during fiscal year 2013. In February of that year, EDMC announced a tuition freeze extending through 2015 aimed at refocusing on student needs. Enrollment further decreased to approximately 120,920 students by 2014.
From June 2013 through June 2014, EDMC reduced its workforce by about 2,600 employees while closing or initiating closure procedures at several campuses. On May 6, 2015, it declared plans to shut down fifteen Art Institute locations due to diminishing enrollment and organizational restructuring. By June 2016, most Brown Mackie College campuses were scheduled for closure—22 out of a total of 26 sites.
In December 2016, nine Art Institute campuses along with all South University locations were placed on probation by the Southern Association of Colleges and Schools. Financially, EDMC experienced a near-total collapse in stock value alongside defaulted bond ratings; shareholder equity was further diluted as part of debt restructuring agreements. Moody’s downgraded EDMC’s credit rating to D-PD in January 2015. CEO Edward West resigned in August 2015 after an unprofitable tenure; meanwhile, EDMC was delisted from NASDAQ in November 2014.
The company faced multiple lawsuits accusing it of deceptive recruitment practices. In November 2015, EDMC agreed to pay $95.5 million to settle claims alleging illegal compensation of recruiters based on student enrollments.
By 2016, plans were underway to close numerous Art Institute and Brown Mackie campuses. In 2017, remaining Brown Mackie campuses were sold to Ross Medical Education Centers while ownership of Art Institutes transferred to The Dream Center Foundation; this transaction was completed in October.
At that point, EDMC operated a total of 109 locations but was actively closing over forty Brown Mackie and Art Institute campuses. On October 18, 2017, the sale of Art Institute Schools along with South University and Argosy University to Dream Center Foundation was finalized.
On June 30, 2018, EDMC filed for Chapter7 bankruptcy protection and commenced liquidation of its assets.
In a settlement involving more than 200,000 borrowers alleging fraud by these institutions—Argosy University, The Art Institutes, Brown Mackie College, and South University—EDMC schools were included among those eligible for student loan cancellation in 2022. This agreement acknowledged significant misconduct by these entities. The Supreme Court allowed this $6 billion debt relief settlement to proceed as of April 2023.
Corporate affairs
EDMC was headquartered in Pittsburgh, Pennsylvania. Mark A. McEachen assumed the role of chairman, succeeding Todd Nelson, who had led the company since July 2012. Edward West held the CEO position until his departure on August 28, 2015; currently, the company does not list a CEO. The board of directors includes five members, all appointed within the last year. Following the 2015 debt restructuring process, McEachen was nominated by preferred stockholders.
Political activities
Starting in the late 2000s, EDMC actively lobbied on regulatory matters impacting the for-profit education sector. The company opposed the Department of Education's June 2011 "gainful employment rule," which limited federal student loan eligibility for schools with unsatisfactory graduate outcomes. EDMC contended that this regulation restricted access for minority and low-income populations.
In 2009, EDMC created a political action committee (PAC) aimed at shaping policies relevant to its industry. During the 2010 election cycle, this PAC contributed more than $50,000 to candidates and committees across party lines, including those advocating for repeal or modification of the gainful employment rule. Moreover, EDMC invested $850,000 in lobbying activities that year.
In 2010, EDMC co-established the Coalition for Educational Success to promote regulatory reforms advantageous to private educational institutions. The coalition, represented by lobbyist Lanny Davis, effectively influenced amendments to the gainful employment rule that exempted certain vocational programs and provided compliance deadline extensions.
Anthony J. Guida Jr., serving as EDMC’s Senior Vice President of Regulatory Affairs and Strategic Development, participated on the U.S. Department of Education’s Advisory Committee on Student Financial Assistance from 2009 through 2012. He also held leadership positions within advocacy organizations such as the Association of Private Colleges and Universities’ Federal Legislative Affairs Committee.
Lawsuits concerning financial aid and recruitment practices
In 2007, two former recruiters at EDMC filed a whistleblower complaint regarding recruitment and compensation methods. This prompted the U.S. Department of Justice in 2011 to launch a federal lawsuit representing eleven states and the District of Columbia. The civil action, pursued under the False Claims Act, sought recovery of $11 billion in federal student aid awarded to EDMC institutions between 2003 and 2011. The DOJ claimed that EDMC breached federal prohibitions on incentive-based pay and unlawfully obtained federal funds. EDMC defended its compensation structure as compliant with federal regulations and legally authorized. By May 2012, allegations related to illegal compensation were dismissed; however, other claims persisted. Additionally, EDMC resolved a similar lawsuit with a former South University recruiter under confidential terms.
Another whistleblower suit filed in 2010 by a former South University recruiter accused the company of overstating graduate employment rates to attract enrollees. Unlike the 2011 federal case, this lawsuit did not involve DOJ participation. In October 2012, a U.S. magistrate judge dismissed certain claims but allowed others to move forward. In May 2013, a judge denied EDMC's motion to dismiss and ordered discovery before trial in 2014.
As of March 2013, both cases remained unresolved; EDMC characterized them as "entirely without merit." In December 2013, EDMC agreed to settle a $3.3 million civil case with the Colorado Attorney General regarding deceptive marketing practices at Argosy University’s Denver location. The allegations centered on misleading representations about American Psychological Association accreditation for its counseling psychology program, which impacted students’ licensure internship eligibility. The settlement provided tuition refunds for 66 students and imposed restrictions on program advertising. By January 2015, Colorado regulators had approved the Ed.D. in Counseling Psychology for licensure purposes.
In November 2015, the U.S. Department of Justice announced that EDMC would pay close to $95.5 million to resolve accusations of unlawful incentive payments that encouraged aggressive recruiting tactics. The agreement also included forgiving $102.9 million in loans for roughly 80,000 students—averaging about $1,370 per individual. This settlement concluded four whistleblower lawsuits and a consumer fraud investigation conducted by 39 states plus D.C., which charged EDMC with misleading prospective students about job placement statistics and postgraduation success during recruitment efforts.
Investigations
In recent years, investigations were launched by four states, including Florida (October 2010), New York, California, and Kentucky, which issued a subpoena related to Brown Mackie College in December 2010. In August 2010, the U.S. Government Accountability Office (GAO) scrutinized EDMC along with other private educational institutions, uncovering that Argosy University recruiters provided misleading information to undercover applicants concerning tuition fees and program quality. The GAO later amended sections of its findings, which were addressed during a U.S. Senate HELP Committee hearing in September 2010. A 2011 Department of Justice report characterized EDMC’s sales environment as a "boiler room" culture primarily driven by aggressive student recruitment.
By January 2014, EDMC was among multiple for-profit education providers under investigation by various state attorneys general over their operational practices. During the three months preceding February 2014, EDMC's stock value plummeted by more than 75%, reflecting both shrinking enrollment numbers and probes from state attorneys general and the Securities and Exchange Commission. According to data submitted to the Senate Harkin Commission, out of 78,661 students enrolled in EDMC-owned colleges during 2008–2009, approximately 62.1% had withdrawn by mid-2010. Enrollment figures dropped from a high of 160,000 students to roughly 120,000 by 2013 across all EDMC-managed campuses.
A July 2016 investigation by the Maine Sunday Telegram exposed that former EDMC CEO John R. McKernan Jr. utilized the EDMC Foundation—a nonprofit entity—to bypass federal 90/10 funding regulations, raising significant issues about corporate governance and compliance within EDMC’s operational framework.
In 2010, a group of EDMC shareholders initiated legal action claiming the company misrepresented information to investors prior to its 2009 initial public offering, resulting in financial losses following stock declines in 2010. This lawsuit, which included shareholders from OPPRS and SEPTA, was dismissed in September 2011 due to insufficient evidence proving that EDMC intentionally misled its investors.
Labor issues
Two former instructors at the Art Institute of California filed a lawsuit against EDMC in April 2016, alleging failure to pay minimum wages and provide legally mandated rest breaks. They accused the company of cutting employee compensation as a strategy to increase profitability.
Financial issues
Standard & Poor's downgraded EDMC’s credit rating to CCC+ in February 2014 amid falling enrollment figures. Moody’s further reduced the rating to D-PD in January 2015, signaling default on long-term debt obligations. In that same year, principal creditor KKR assumed control over EDMC’s assets. By July 2016, EDMC’s shares were trading over-the-counter at approximately one cent per share.
Consumer fraud lawsuits
In 2016, former nursing students from Brown Mackie College in Tucson filed lawsuits citing inadequate training that rendered them unemployable. An investigation by the state nursing board uncovered unqualified instructors and improper use of veterinary supplies for instructional purposes. Consequently, students were prohibited from taking licensing examinations and required to undergo retraining funded by EDMC.
Employee-ADR lawsuits
By late 2016, legal disputes involving EDMC extended to its outside law firm, Pittsburgh-based Reed Smith LLP. Represented by Attorney Katherine Ryan, the company confronted discrimination claims dating back to August 2012. In October 2016, the U.S. Court of Appeals for the Third Circuit struck down EDMC’s retroactive alternative dispute resolution policy that prevented employees from initiating lawsuits. The unanimous decision reinstated federal litigation against the Art Institute of Pittsburgh seeking damages exceeding $4 million and alleging legal malpractice connected to EDMC operations.