Career Education Agrees To Cancel Nearly $500 Mln In Student Debt

(RTTNews) - For-profit education company Career Education Corporation (CECO) has agreed to erase nearly $500 million in in debt incurred by former students as part of an agreement to resolve a multi-state inquiry during the last five years.

Career Education said Thursday that it has reached agreements with attorneys general from 48 states and the District of Columbia to bring closure to the multi-state attorneys general inquiry on-going since January 2014.

Tom Miller, the attorney general of Iowa and one of the lead negotiators of the settlement, said that as part of the settlement, Career Education has agreed to reform its recruiting and enrollment practices and forgo collecting about $493.7 million in debts owed by 179,529 students nationally.

Career Education has also agreed to pay $5 million to the states. As part of the agreements the company expressly denied any allegations of wrongdoing or liability.

Founded in 1994, Schaumburg, Illinois-based Career Education offers primarily online courses through American InterContinental University and Colorado Technical University. As of September 30, 2018, the company had a total student enrollment of about 34,610 students.

In connection with the agreements, Career Education expects to record a total pre-tax charge of $6.3 million. This consists of a $5.0 million payment to the attorneys general to cover expenses incurred during the course of their inquiry over the last five years, and the write-off of about $1.3 million of accounts receivable.

Career Education said that although it agreed to forgo efforts to collect on approximately $556 million of old accounts receivable incurred during the last 30 years by students at more than 100 campuses, all but about $1.3 million of these old accounts receivable were written-off in prior reporting periods in the ordinary course of the company's operations.

Career Education said it will work with a third-party administrator over the next three years who will provide ongoing oversight and review of the company's implementation of the terms of the agreements. The company will reimburse the administrator a total of $2.0 million for fees and expenses to be paid over the next three years.

The company has entered into agreements with the attorneys general of all states except for New York and California. The company had previously entered into an agreement with the attorney general of New York.

Career Education expects the state of California to enter into a stipulated judgment with the company at a later date reflecting the terms of the agreements.