Shuttered for-profit college firm to pay $28M settlement over closures

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Dive Brief:

• A shuttered for-profit college corporation will pay $28 million to settle allegations it left students in the lurch following its sudden closure.
• A lawsuit against the Education Corporation of America and its subsidiaries claimed the coalition didn’t provide students a way to complete their education when its colleges closed. ECA’s closure also resulted in over $100 million in student loan discharges, the suit said.
• The settlement agreement was filed in December and finalized Monday, according to the plaintiff legal team. The money will be distributed among almost 2,000 creditors and former students by John Kennedy, the head of the ECA’s receivership estate.

Dive Insight:

Prior to its closure, ECA operated several for-profit institutions nationwide, including Brightwood College, Brightwood Career Institute and Virginia College. The already-struggling company shut down in 2018 after the Accrediting Council for Independent Colleges and Schools suspended its colleges’ accreditation. ACICS has been much-beleaguered in its own right and is on track to shut down by early 2024.

ECA knew ahead of time that its colleges were insolvent but did nothing to avoid their ultimately chaotic closure, the lawsuit said. As a result, over 20,000 students were left without pathways to completing their degrees.

The U.S. Education Department panned ECA’s closure plan at the time.

The only remaining college from ECA’s roster is the New England College of Business, which was separately accredited. NECB, now a subsidiary of Cambridge College in Massachusetts, is named as a defendant in the settlement.

The settlement also listed three former ECA executives by name: former chair Avy Stein, former chief financial officer Chris Boehm, and former CEO Stuart Reed. Stein also co-founded Willis Stein & Partners, the private equity firm that served as ECA’s majority shareholder. Boehm served as a partner at the firm. 

Michael Collyard, partner at Robins Kaplan law firm and co-lead on the case against ECA, called the settlement a “tremendous result.” 

“Mr. Kennedy recovered $28 million dollars for an estate that essentially had no assets other than its claims,” Collyard said in an emailed statement.