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Government Actions

State of Washington vs. Career Education Corporation

AG Ferguson obtains more than $7M in student debt relief for thousands of Washingtonians from for-profit college
For-profit education company Career Education Corporation misrepresented the cost of attendance and job placement rates to its students

OLYMPIA — More than 3,000 Washingtonians will receive more than $7.6 million in debt relief from Career Education Corporation (CEC), a for-profit higher education company, as part of Attorney General Bob Ferguson’s legal action over the company’s use of deceptive practices to attract potential students. CEC owned and operated two campuses in Washington until they closed down.

The most debt relief an individual Washington student will receive is $59,000. The median amount of debt relief is $1,463.

In addition to debt relief and other injunctive terms, the company is legally required to disclose to prospective students accurate information about cost, graduation rates, job placement rates and median debt for graduates.

 “Student borrowers victimized by deceptive recruitment practices deserve loan relief and legal protection,” Ferguson said. “My office will hold accountable any for-profit college that tries to take advantage of the aspirations of Washington students.”

Career Education Corporation (CEC), headquartered in Illinois, has owned several for-profit schools, including Le Cordon Bleu, Briarcliffe College, Brooks Institute, Brown College, Harrington College of Design and International Academy of Design & Technology (later known as Sanford-Brown). The company now only operates American InterContinental University (AIU) and Colorado Technical University (CTU).

Washingtonians who attended a CEC institution that closed before Jan. 2, 2019 will receive relief from institutionally held student loans issued by CEC. Washingtonians whose final day of attendance at CEC’s two remaining schools, AIU or CTU, occurred on or before Dec. 31, 2013 will also receive relief from CEC-issued loans. By that date, CEC had already changed many of its misleading practices at those two institutions.

Students do no need to take any action to receive relief. CEC will notify all eligible students of their debt relief within 60 days. Former students with questions about their eligibility may contact CEC.

CEC misled students about the total costs of enrollment at its institutions. The company did not disclose that some of the programs lacked the necessary professional accreditation, leaving students unable to obtain employment or the licensing they needed to continue in their fields.

The company also misrepresented the job placement rates of past graduates. When calculating job placement rates, CEC included graduates who only worked temporarily — even as little as one or two weeks — or were employed in a field unrelated to their degree.

CEC told students that credits from their institutions could be transferred to other institutions. In reality, it was very difficult or impossible for students to transfer to a non-CEC school.

In several consumer complaints to the Attorney General’s Office, former CEC students reported that the company did not disclose that their credits could only transfer to other CEC schools. As a result, some complainants took out student loans for degree programs that they were unable to finish, either at CEC or at another institution. Students incurred debt as much as $50,000 in some cases.

The company owned two physical locations in Washington, both located in Tukwila: a Sanford-Brown campus, previously known as the International Academy of Design and Technology, and a Le Cordon Bleu campus. Both schools stopped taking new students in 2015 and have since closed down. Some Washingtonians may still be attending CEC schools through online programs.

Today’s resolution is a result of a multistate investigation into CEC’s deceptive and misleading practices. Washington and 47 other states investigated the company’s recruitment practices and found that CEC misrepresented the cost of attendance, graduation rates, expected future salaries for graduates and job placement rates. CEC will forgo collecting more than $493.6 million in debts owed by nearly 175,000 students nationwide.

In addition to the more than $7.6 million in student debt relief, CEC is legally obligated to:

• Disclose to prospective students the total direct cost, median debt for those who complete the program, default rates, program completion rates, credit transferability, median earnings for graduates, and job placement rates;
• When calculating job placement rates, only include students who get jobs in their field and remain in their field for more than 30 days;
• Notify credit-reporting agencies of the debt relief to remove the debt from students’ credit reports. If a student finds out the debt has not been removed from their credit report, CEC must again notify credit-reporting agencies;
• Prohibit misrepresentations when recruiting students;
• Record online chat transactions and telephone calls with prospective students, and;
• Provide a risk-free trial period of 21 days for online programs and 7 days for on-campus programs, if they have less than 24 college credit hours when starting the program.

Assistant Attorney General Craig Rader handled the case for Washington.

Student loan work of the Attorney General’s Office

Ferguson has filed two lawsuits against the federal government to defend important student loan protections. A federal judge ruled in one case that the Department of Education improperly delayed borrower defense protections. The other case, regarding the gainful employment rule, is still ongoing. Ferguson has also urged the federal government to protect students in 10 separate multistate letters.  

The Attorney General’s Office introduced the Student Loan Transparency Act in 2017, a bill that requires schools to provide students basic information on their student loans. The bill passed overwhelmingly in the House with a bipartisan vote and unanimously in the Senate.

In January 2017, Ferguson filed a lawsuit, along with the state of Illinois and the U.S. Consumer Financial Protection Bureau, against loan servicer Navient. The lawsuit alleges that Navient engaged in a number of unfair and deceptive practices, including misapplying borrower payments and using aggressive and misleading collection tactics.

He also has recovered almost $1.5 million cracking down on debt adjustment companies that charge fees to help borrowers consolidate their federal student loans and enroll in income-driven repayment plans — tasks that borrowers’ loan servicers can and should help them with for free. More information on the office’s student loan work is available here.

To assist student loan borrowers in Washington, the Attorney General's Office has compiled a Student Loan Survival Guide. This guide provides tips and links to resources to help high school students thinking about attending college, former college students who are not able to keep up with their payments, parents of students and everyone in between.