Daymar College agrees to $12.4M settlement with attorney general as for-profit colleges enter gubernatorial mix
09/10/2015 08:22 PM
Students who attended the Daymar College between July 27, 2006, and July 27, 2011, are eligible for part of a $12.4 million settlement reached today by Kentucky Attorney General Jack Conway, resolving three years of litigation between the state and the for-profit college.
It’s estimated that 12,294 former Daymar students are eligible for settlement relief.
The lawsuit, filed in July of 2011, alleged that Daymar College violated the Kentucky Consumer Protection Act by:
- Denying students access to financial aid to buy their textbooks from vendors other than Daymar’s bookstore, which allegedly charged significantly higher prices than other vendors.
- Misrepresenting students’ ability to transfer credits earned at Daymar to other institutions.
- Admitting students who failed Daymar’s admissions assessment in violation of the school’s own admissions policy.
- Hiring unqualified faculty who lacked the required credentials.
The Consent Decree, entered this morning in Daviess Circuit Court, requires Daymar to pay $1.2 million to the Office of the Attorney General, which will be distributed to qualified participating students who attended Daymar between July 27, 2006, and July 27, 2011. It will be pro-rated according to the number of terms the students completed and the number of claims that are received.
In addition, Daymar will not collect an additional $11 million in institutional debt owed to it by former students whose last day of attendance at a Kentucky Daymar campus was between July 3, 2006, and July 26, 2012. These students are not required to file claim forms regarding the debts for which Daymar has agreed to forgo collection.
This does not include debt that is owed to non-Daymar entities, such as the federal government, because the attorney general’s office does not have the authority to require federal loan forgiveness.
“Daymar will correct and/or remove the credit reporting of collection activity regarding any amount or any amount in which it agreed to forgo collection,” Conway said.
Conway estimates the highest student debt is $27,000, with the average debt relief per student in the range of $1,500 to $1800.
“Eleven million dollars is the estimate from Daymar to forgive all of the institutional loans that they have on the collection book for that period of time from 2006 and 2012,” Conway said.
In addition, the court appointed former Tennessee Attorney General Robert E. Cooper, Jr. to serve as a compliance monitor for the next two years. The compliance monitor may employ secret shoppers to pose as prospective students during the recruitment process, review complaints, visit campuses, observe admission and financial services training and interview Daymar students and employees.
In addition to the settlement dollars and debt relief, the settlement contains guidelines for Daymar’s dealings with future students.
Daymar must offer a 21-day, risk-free refund period for students, and the institution must disclose to students total amount of tuition, the median debt for people who complete their education, the degree completion rate, median earnings for those who complete degrees and a warning about the limitation of the ability to transfer credits earned at Daymar to other institutions.
As part of the agreement, Daymar admits no wrongdoing, but Conway says the fact that the school agreed to the settlement speaks for itself.
“You don’t agree to a settlement of $12.5 million dollars as well as strong adjunctive terms for two years with a compliance monitor if you didn’t do anything wrong,” Conway said.
For two years, Daymar will also conduct free, bi-monthly career-services workshops that will be made available to current and former students. The workshops will address topics such as creating and updating a resume, filling out job applications, how to search for employment and interviewing skills.
Daymar has also agreed to provide a free “skills” class for all first term students. This course will address such topics as study skills, organization, literacy, financial skills and interest inventories.
Daymar has also changed its policy regarding textbooks and now includes the price of books in tuition.
For-profit colleges in the governor’s race
As federal and state governments question whether some for-profit institutions mislead students and investors, the topic has emerged in this year’s gubernatorial election with investments made by two firms linked to Republican candidate Matt Bevin several years ago.
Integrity Asset Management, the money-management company started by Bevin, bought 908,464 shares in California-based Corinthian Colleges Inc. worth $14.5 million during the third quarter of 2007, according to filings with the Securities and Exchange Commission.
Corinthian Colleges shuttered in April amid investigations into allegations such as misrepresenting its finances and job-placement numbers, according to a report by Business Insider.
Integrity’s shares in Corinthian grew to 1.2 million by the fourth quarter of 2007, with a value of $18.3 million. The investment firm also added 42,610 shares of DeVry University stock, worth $2.2 million, at that time, SEC filings show. DeVry faces similar inquiries, with the Federal Trade Commission launching a probe into the company’s marketing practices last year.
Veracity Funds, another investment firm founded by Bevin, also secured 71,857 shares of Corinthian stock worth $1.3 million around the same time, according to a January 2008 SEC filing.
Both firms divested from the for-profit colleges by the next round of quarterly SEC filings, however.
Bevin said Thursday he couldn’t comment on the moves because clients directed how their funds were invested.
“It’s their money,” he said. “It gets invested where they want it to be invested, and so ask me a question about that, I couldn’t even begin to give you an answer as to why that particular client in that instance wanted it the best return they could have on their money without any kind of restrictions on it, so determination was made at that time.”
Bevin went on to criticize Conway for “uncorking another political stunt” with his press conference regarding Daymar College.
“He’s a man that talks both sides of his mouth,” Bevin said. “So this is another political stunt. He’ll try to do it at the expense of a handful, try to curry some favor with folks, but he’s offering no solutions.”
When asked if he felt for-profit institutions misled investors, Bevin said he would leave that to investigators.
“I’m not involved in that investigation process,” he said.
Conway, during his press conference, declined to address investments made by Bevin’s firms in for-profit colleges, but he said investors shouldn’t be viewed as victims since some larger institutions are owned in part by the likes of Goldman Sachs and hedge funds.
“I think what happened there is you had the federal Department of Education, who we’ve worked with on this issue, didn’t do a very good job of turning off the spigot,” Conway said. “I mean, a couple years ago the for-profit college industry in this country was a $30-billion-a-year industry, and so there’s smart analysts up on Wall Street that can figure out where they’re going to invest their dollars.
“The federal government’s letting that much money flow with that little accountability, and they wanted to get in on part of the action, so I’m having an awfully hard time calling the investors, and particularly those institutional investors, as victims.”
Additional reporting from Lexington by Pure Politics reporter Kevin Wheatley.
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