Information About Art Institutes Closures and Bankruptcies
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.
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 campuses. Dream 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.
The Project on Predatory Student Lending is part of the Legal Services Center of Harvard Law School (LSC), a community law office and clinical teaching site of the law school. Clinical students join the Project’s staff to litigate cases on behalf of clients, in partnership with community-based organizations and advocacy organizations.
Posted on 22 August 2018
|The Project on Predatory Student Lending is part of the Legal Services Center of Harvard Law School (LSC), a community law office and clinical teaching site of the law school. Clinical students join the Project’s staff to litigate cases on behalf of clients, in partnership with community-based organizations and advocacy organizations.|
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