WASHINGTON — A Senate committee investigation critical of the for-profit higher education industry found that Education Management Corp., the company whose board of directors is headed by former Maine Gov. John McKernan, had withdrawal rates higher than most of the more than two dozen institutions studied in the report.
Education Management Corp. is a Pennsylvania-based company that operates more than 100 for-profit campuses around the country, including the large network of Art Institute campuses. McKernan, who is married to Maine Sen. Olympia Snowe, has served as chairman of the company since 2006.
Education Management was one of roughly 30 companies profiled in a scathing Senate report that accuses the for-profit higher education industry of predatory recruiting and charging high tuition — often paid for with federally backed student loans — while allowing many students to drop out without a degree.
The report acknowledged that Education Management invested more money in instruction and employed considerably more full-time instructors than most for-profit schools. But it raised concerns about whether taxpayers were getting enough return on investment on federal funds flowing to the company’s campuses.
Education Management received roughly $1.8 billion in federal education funding in 2010 in the form of federally backed financial aid for the institution’s 158,000-plus students that year, according to a report from the Senate Committee on Health, Education, Labor and Pensions.
But 62.1 percent of the nearly 78,700 students who had enrolled in Education Management-owned colleges in 2008-09 had withdrawn from the programs by mid-2010, compared to an average withdrawal rate of 54 percent among all companies studied.
The 56.8 percent withdrawal rate for students pursuing certificate programs, meanwhile, was the highest among all companies reviewed in the report and substantially higher than the nationwide average of 38.5 percent.
The high withdrawal rate, the report states, “has serious repercussions for students given the debt that rapidly accrues.”
“Largely based on the high numbers of students leaving the programs without completing a certificate or degree, it is not clear that the $1.8 billion taxpayers (put) in the company in 2010 is a worthwhile investment,” the report concludes.
McKernan, a Republican who served two terms as Maine governor from 1987 to 1995, referred questions on the report to the company’s main office.
In a statement, Education Management spokeswoman Jacquelyn Muller said the company was still reviewing the report.
But Muller said Education Management is committed to working with the Senate committee to the “critical issues” confronting all college students, such as rising student debt levels and the challenges of finding good-paying jobs in a poor economy.
“We maintain our deep commitment to doing things right — right by our students, regulatory bodies and our own internal standards,” Muller said. “We are taking steps to provide current and prospective students information that they need to be informed consumers, and we are actively promoting comprehensive reform that would apply policies equally to all of our country’s colleges and universities, regardless of ownership structure.”
In an interview, Muller said there was no connection between the Senate report and the company’s announcement late last week that McKernan would be stepping aside as chairman next month. The transition to a new chairman was timed to follow the upcoming report on EDMC’s last fiscal year, Muller said.
“Gov. McKernan is continuing to serve on the board of directors,” she said, adding all of the company’s executive management team is also staying the same.
EDMC has also been the target of several lawsuits and state investigations into recruiting, financial aid and other practices.
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