Update | Information About Art Institutes Closures and Bankruptcies

July 13, 2018

Posted July 4, updated July 13, 2018

The Project on Predatory Student Lending is monitoring Dream Center’s recently-announced closure of 30 of the Art Institutes, Argosy University, and South University campuses that it owns and operates. We will update this page with the most current information available to us about the closures, the school’s previous owner’s bankruptcy, and Dream Center’s plan for enrolled students.

THE BASICS

Until several years ago, EDMC was one of the biggest for-profit school companies, and owned chains including the Art Institutes, Argosy University, and South University. It targeted low-income students, promising a quality education and career opportunities, and charged them high tuitions for sub-standard programs. After years of declining profits and trouble maintaining accreditation, EDMC began to sell its schools.

In 2017, EDMC sold most of its schools for $60 million to Dream Center Education Holdings, LLC, a subsidiary of a LA-based religious organization, the Dream Center Foundation. Dream Center is in the process of converting the schools from for-profit to non-profit status. Dream Center’s application to the Department of Education to approve the non-profit conversion is pending. If the conversion is approved, Dream Center-operated schools will be subject to even less federal oversight than they are currently. You can read more about the sale and proposed conversion in an earlier post here.

On Friday, June 29, 2018, Education Management Corporation (EDMC) and 58 related companies filed for bankruptcy. The bankruptcy filings include some of the campuses that EDMC sold and also some that it didn’t sell.

The bankruptcy filings say that EDMC does not expect to have any funds to distribute to “unsecured creditors.” In other words, it won’t have any money left at the end of the bankruptcy. In fact, EDMC says that it has between $0 and $50,000 in assets, but owes between $500 million and $1 billion. Its list of people and companies it owes money to is 1,500 pages long, and includes political campaigns, copy companies, and financial institutions. It will file more financial information in the coming weeks.

One of EDMC’s lawyers for the bankruptcy is Jay Jaffe, from the firm Faegre Baker Daniels LLP. Mr. Jaffe and Faegre Baker Daniels are also representing the estate of ITT Educational Services, Inc. (ITT Tech), in its bankruptcy, which was filed in September 2016. You can read more about the ITT bankruptcy and the Project’s representation of former ITT students here.

At the same time that EDMC filed for bankruptcy, Dream Center announced in an internal memo that it will close 30 of the campuses that it bought from EDMC just last year, including several Art Institutes campusesDream Center has since confirmed these plans, and blames declining enrollment and an increased demand for online education for the closures.

Although we’re not yet sure what, if any, connection exists between EDMC’s filings and the Dream Center’s closures, it is clear that both corporations are acting to protect their own interest while further harming their former and current students.

Dream Center has provided limited information about the closures, but it has shared its plan for affected students. We have summarized its plan below. At the bottom of this post is a list of campuses that Dream Center has said it will close.

INFORMATION ABOUT SCHOOL CLOSURES

HOW THE CLOSURES WILL AFFECT STUDENTS WHO ARE CURRENTLY ENROLLED

Through leaked Dream Center memos and accounts and forms shared by current students, the Project on Predatory Student Lending has learned that Dream Center is giving students at closing campuses 5 options. Here is what we’ve learned, some information about loan cancellation, and important things to keep in mind until we learn more. A full list of affected schools is at the end of this post.

Options For Students at Closing Schools

Dream Center announced that students may choose from the following 5 options for how to continue their education:

-Complete your degree at your current campus by the end of 2018, when the campus will close

-Complete your degree via the Art Institutes Online

-Complete your degree at another Art Institutes campus

-Complete your degree at another Dream Center school, either Argosy University or South University

-Transfer to another, unspecified university outside the Dream Center network of schools

Dream Center is trying to convince students to accept these options by offering a 50% tuition reduction to students who remain at a Dream Center school and a $5,000 tuition grant to students who transfer to one the unspecified other schools.

We have not been able to determine what will happen to students who choose not to accept these options, but it is likely that they will be automatically withdrawn from their program.

Students should not let Dream Center trick them into accepting these offers before they have all the information they need to make an informed decision! Only accept an offer once you have all the information and if it’s the best option for you.

As part of these offers, Dream Center will make students sign acknowledge forms and waivers that will relieve it of any responsibility it owes to students and may prevent students from receiving relief from their federal loans in the future.

Students should not sign anything until they have read it carefully, had all of their questions answered, and decided that what the best decision is for them!

Dream Center is Trying to Deprive Students of Their Right to Loan Cancellation

The federal government has a program called the Closed School Discharge program that will cancel federal student loans when students’ schools close. It is only available to students who are enrolled when the school closes or who had withdrawn within 120 days of the school closure. Students who accept an offer to continue their education somewhere else when their school closes do not qualify for Closed School Discharges.

In a public disclosure, the Higher Learning Commission, an accrediting agency that oversees two Dream Center campuses in Illinois and Colorado, recognizes that these schools are “at risk of closing” and urges students to be aware of Closed School Discharges. Dream Center does not want its students to get Closed School Discharges! That’s because they will have to pay back the government for each loan that is cancelled from its schools.

Dream Center timed its closings so that anyone who withdraws will do so more than 120 from the closing, and is using tuition discounts to convince students to stay enrolled. These are both ways to prevent students from qualifying for a Closed School Discharge. This is not right!

Important Information for Students

There’s still a lot that we don’t know about Dream Center’s plan to close its school, and how that will affect students’ rights. While we wait to learn more, it is important for affected students to ask questions, share information, and protect themselves. Here are a few specific things you can do:

-Ask your school for to be placed on a formal leave of absence. Dream Center schools may not agree to give leaves of absence, but if they do it may help buy some time and maintain students’ eligibility for Closed School Discharges

-Do not sign anything without reading it completely, getting all of your questions answered, and understanding how it affects your right to a Closed School Discharge or to enforce your rights against your school. Dream Center might try to have you waive your rights. Do not do that without understanding the full impact of that decision, which will vary student by student.

-Share your experience and information!! There are 1000s of students across the country that are affected by this. Join Facebook groups. If you receive information from your school, share it!

-Visit the Debt Collective website and learn how borrowers across the country are fighting back against bad schools and unfair and illegal debt.

-Continue to visit this blog for updates.

-Contact your U.S. representative or senator and let them know what’s happening! Demand that they pressure the Department of Education to declare that all students affected by these closures are eligible for Closed School Discharges unless they WANT to accept Dream Center’s offers.

EDMC’s Bankruptcy May Limit Students’ Ability To Recover From Their Schools

For former students of EDMC-operated schools, EDMC’s bankruptcy may limit their ability to seek recovery directly from their school, even in arbitration. Former students may wish to file claims in one or more of the bankruptcy cases; more information will follow in the coming days.

Please visit the Federal Student Aid website, the Debt Collective, or contact the Project on Predatory Student Lending (that’s us!) to learn more.

The Project on Predatory Student Lending is fighting for and with students who have been cheated by the predatory federally-funded colleges. We are monitoring the EDMC filings and Dream Center closures and will provide updates for affected students as soon as possible.

List of Affected Schools

ART INSTITUTES

CAMPUSES SOLD TO THE DREAM CENTER

The Dream Center will cease enrollment at the following 18 Art Institutes campuses:

Arizona: Phoenix
California: Inland Empire/San Bernardino, Orange County/Santa Ana, Sacramento, San Francisco
Colorado: Denver
Florida: Fort Lauderdale
Illinois: Chicago, Schaumburg
Indiana: Indianapolis
Michigan: Detroit
North Carolina: Charlotte, Raleigh-Durham
Oregon: Portland
Pennsylvania: Philadelphia
South Carolina: Charleston
Tennessee: Nashville
Virginia: Arlington

The Dream Center will continue to operate the following 12 Art Institutes campuses:

California: Hollywood, San Diego
Florida: Tampa
Georgia: Atlanta
Nevada: Las Vegas
Pennsylvania: Pittsburgh
Texas: Austin, Dallas, Houston, San Antonio
Virginia: Virginia Beach
Washington: Seattle

All other Art Institutes were not sold to Dream Center and have closed.

Argosy

THE DREAM CENTER WILL CEASE ENROLLMENT AT THE FOLLOWING 10 ARGOSY CAMPUSES:

California: Inland Empire, San Diego, San Francisco
Colorado: Denver
Florida: Sarasota
Illinois: Schaumberg
Tennessee: Nashville
Texas: Dallas
Utah: Salt Lake City
Washington: Seattle

South

THE DREAM CENTER WILL CEASE ENROLLMENT AT THE FOLLOWING 3 SOUTH CAMPUSES:

Michigan: Novi
North Carolina: High Point
Ohio: Cleveland