More Questions About EDMC's Job Placement Rates

Has the country’s second largest for-profit higher education company, Education Management Corporation (EDMC) deceived prospective students, employers, and investors by disclosing a significantly higher set of job placement rates to them than it reports to its regulators?

That is one of the key allegations made in a lawsuit brought by a former EDMC admissions director that a U.S. District Court judge has just allowed to proceed.

Jason Sobek, who served as a Project Associate Director of Admissions for EDMC Online Higher Education’s South University brand from June 2008 to November 2010, filed the lawsuit under the Federal False Claims Act. He is seeking the return to the government of millions of dollars in federal student aid funds that he says EDMC improperly obtained by falsely certifying that it was in compliance with U.S. Department of Education regulations.

The suit says that EDMC had “two sets of books regarding job placements” – one that it used to recruit students and impress investors and employers, and another one that it reported to accrediting agencies and state regulators. According to the lawsuit, EDMC “artificially inflated” the first rate by excluding a large number of graduates from its calculations – including “single, stay-at-home parents” and those who were working in fields unrelated from what they studied. The lawsuit cites an internal “Career Services Statistical Reporting Procedures” memo that acknowledges that certain categories of graduates are “counted differently” in the different disclosures the company makes.

This is not the first time that EDMC has been accused of misleading prospective students about its record of placing graduates into jobs. In September 2010, Kathleen Bittel, a then-career service advisor at EDMC’s Art Institute of Pittsburgh testified at a U.S. Senate hearing about tricks she said the company played to inflate its job placement rates. Among other things, she said EDMC put tremendous pressure on employees to persuade graduates to verify that they were working in the fields in which they trained even when it was abundantly clear that they weren’t. EDMC repeatedly denied Bittel’s allegations.

The company has not yet responded definitively to Sobek’s charges. However, in its motion to dismiss the case, EDMC argued that reporting different rates to prospective students and accrediting agencies is not unlawful. “Even if true,” the company wrote, the Department of Education “never required that marketing statistics be calculated one particular way.”

Education Department regulations do, however, prohibit colleges from deliberately misleading students to get them to enroll.

EDMC may soon have to address the allegations more directly. That’s because late last month Judge Terrence F. McVerry of the Federal District Court in the Western District of Pennsylvania rejected EDMC’s attempt to squash the lawsuit and ruled that the whistleblower in the case provided sufficient evidence of possible wrongdoing to allow the litigation to move forward.

No matter how it’s decided, this case shows once again why the federal government needs to develop a single, national standard that for-profit colleges would be required to use when calculating their job placement rates.

The methodologies that career colleges currently use to determine these rates vary state by state and accreditor by accreditor, making them impossible to compare. And without a single standard in place, the schools can easily game the system.

As my colleague Ben Miller reported last week, attorney generals in three states have asked the Education Department to clearly define how job placement rates should be calculated. Department officials will have that chance when they rewrite the Gainful Employment regulations. Let’s hope that they take the state attorney generals up on it.