Education Management Corporation: A Comprehensive Overview
Education Management Corporation (EDMC) was a prominent for-profit education provider in North America. Founded in 1962, the company offered a range of academic programs to students through campus-based and online instruction, or a combination of both. EDMC's educational institutions provided opportunities to earn undergraduate and graduate degrees, as well as specialized non-degree diplomas, in diverse fields such as media arts, health sciences, design, psychology and behavioral sciences, culinary arts, business, fashion, legal studies, education, and information technology.
Historical Development and Expansion
EDMC's origins trace back to 1962 when it was established to offer professional development education in Pennsylvania. A significant turning point occurred in 1970 with the acquisition of the Art Institute of Pittsburgh, which had been founded in 1921. This acquisition marked a shift in the company's scope and focus towards higher education in the arts.
Robert B. Knutson played a pivotal role in EDMC's growth, joining the company in 1969 and becoming its president in 1971. Over the next 15 years, Knutson spearheaded an expansion strategy through acquisitions, adding eight institutions to EDMC's portfolio. Seven of these acquisitions were commercial arts schools located in major metropolitan areas such as Denver, Ft. Lauderdale, Atlanta, Philadelphia, Dallas, Houston, and Seattle. These schools were collectively branded as "The Art Institutes" through a national marketing campaign. The eighth acquisition, the National Center for Paralegal Training, offered certificates in legal studies. Miryam L. Drucker, Knutson's wife, also contributed significantly to EDMC's expansion. She joined the company in 1984 as president of The Art Institute of Dallas and later became president of The Art Institute of Fort Lauderdale before leading the Art Institutes umbrella organization in 1988.
During this period, EDMC also prioritized the integration of technology into its classrooms, investing heavily in classroom technology to provide vocational training in areas like computer animation, video production, and desktop publishing. The company implemented new programs and restructured existing ones to improve student completion rates. In 1993, some schools expanded their Associate degree programs in interior design, industrial design, and graphics design into Bachelor of Arts degree programs.
In the early 1990s, EDMC began developing a culinary arts program, launching its School of Culinary Arts at the Colorado Institute of Art (CIA). Beginning in late 1993, that school offered an Associate of Applied Science degree, an 18-month to two-year program for the instruction of fine food preparation and fine dining restaurant operation. In March 1995 EDMC opened Assignments restaurant, a fully operational, 71-seat restaurant which provided an on-the-job training experience to students. On a rotating five-week schedule, students experienced all facets of restaurant operations, including table service, bar service, preliminary food preparation, and final food preparation for the customer. The facility featured a kitchen modeled after the one at New York's Waldorf-Astoria Hotel, with more than four times the space of an average restaurant kitchen.
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EDMC pursued growth through the introduction of new schools and the acquisition of existing schools. In 1995 EDMC purchased two schools from the Ray College of Design, for $1.1 million and the assumption of debt, and renamed the schools The Illinois Institute of Art at Chicago and The Illinois Institute of Art at Schaumburg. EDMC also made the culinary arts program, with an Associate of Applied Science degree, an integral part of the Art Institute of Phoenix where classes commenced in January 1996. The following August the company acquired the New York Restaurant School for $9.5 million.
In October 1996 the Pittsburgh Art Institute celebrated its 75th anniversary. EDMC funded further growth with an initial public offering of stock in October 1996. The company offered 5.4 million shares at $15 per share on the NASDAQ exchange and garnered approximately $45 million. The proceeds funded debt reduction and working capital as well as acquisitions and new schools. EDMC added the Lowthian College in Minneapolis to its chain in January 1997, renaming The Art Institutes International Minnesota. At the Colorado Institute of Art, EDMC expanded the Associate degree programs in interior design, industrial design, and graphic design into Bachelor of Science degree programs. The school also introduced an 18-month certificate program in web site administration, which involved existing multimedia and design classes as well as new programming classes staffed by three new faculty members.
For the fiscal year ending June 30, 1997, EDMC reported revenues of $182.8 million, an increase of 23 percent, while income reached $10 million, an increase of 46 percent. The company attributed the rise in income and revenues to increased enrollment and a 5.5 percent tuition increase during the fall 1996 quarter. A secondary offering of stock in November 1997 raised $79.8 million for growth and improvement. Two acquisitions followed closely after the stock offering: the Louise Salinger Academy of Fashion in San Francisco and Bassist College in Portland, Oregon, renamed The Art Institutes International at San Francisco and The Art Institutes International at Portland, respectively. The Portland school offered Associate and Bachelor's degrees in apparel design, merchandising management, and interior design and a Bachelor's degree in business administration.
In consultation with professionals in computer design technology, EDMC began to formulate new educational programs and launched three new degree programs for Internet marketing and design in June 1999. The company offered a Bachelor of Science degree in online media and marketing, which involved classes on business strategy and online advertising. EDMC launched the program at the Colorado Institute of Art and planned to extend the programs to several other schools after government approval. The Art Institute of Phoenix offered a Bachelor's degree in game art and design, including character animation and complex mapping and modeling. An Associate degree in multimedia and web design involved interactive design and technical elements, such as audio, video animation, still pictures, text, and data. EDMC planned to offer the latter program in Atlanta, Chicago, Dallas, Houston, Ft.
By the end of fiscal year June 30, 1999, revenues at EDMC reached $260.8 million. Federal funding for student grants and loans comprised approximately 66 percent of revenues. Average quarterly enrollment reached 19,325 students compared to 17,002 students in fiscal 1998. Moreover, the company's stock, initially offered at $15 a share, had more than doubled to trade around $33 per share in early 1999. EDMC attributed growth in the student body to new educational programs, expanded degree programs, and more evening degree programs. Approximately 25 percent of the increase in enrollment stemmed from evening classes. Tuition increased six percent in 1999, while net income increased 30.9 percent, to $18.8 million. EDMC also reported that 91 percent of 1998 graduates found employment in their areas of study within six months of graduation.
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Culinary arts education continued to be a major focus of growth, with three new programs initiated during the fiscal year. In January 1999 EDMC introduced a new culinary arts school at the Philadelphia Art Institute; facilities included Suburban Soup, a take-out restaurant at the Suburban Station transit center. EDMC's strategy for further growth involved the addition of two new schools per year. In August 1999 EDMC acquired the American Business and Fashion Institute in Charlotte. With 135 students, degree programs included interior design, fashion merchandising, and retail management. EDMC renamed the North Carolina school The Art Institute of Charlotte. A second acquisition involved the Massachusetts Communications College in Boston, with 450 students.
EDMC continued to improve educational programs at existing schools. In October 1999 the State of Pennsylvania approved EDMC to offer Bachelor of Arts degrees in computer animation, interior design, and industrial design technology at The Art Institutes in Pittsburgh and Philadelphia and a graphic design program at Pittsburgh. The new curriculum added management classes and other field-related courses. The New York Restaurant School, renamed the Art Institute of New York City, received approval to offer an Associate of Occupational Studies in art and design Technology. The program was slated to begin in January 2001. EDMC also planned to expand the culinary arts program there.
EDMC sought to strengthen brand recognition for its educational programs among prospective students and corporate employers. In fall 1999 EDMC introduced the Art Institute Online which offered 12 courses in graphic design. The pilot project was introduced through the Art Institutes of Phoenix and Ft. Lauderdale. The company intended the online courses as a precursor to an online Bachelor of Arts degree in graphic design, the first of its kind. EDMC established corporate partnerships to enrich student education with access to Internet infrastructure and functions. While FRT designed the port specifically for Art Institute students, allowing for interactive capabilities and possibilities for e-commerce, Tut Systems provided the infrastructure for high-speed access.
Growth in student enrollment required EDMC to relocate some schools to new facilities. In May the Colorado Institute of Art, renamed the Art Institute of Colorado, completed a move to a 100,000 square-foot, ten-story building near the site of the original school. The move allowed the school to consolidate offices and classrooms into one building, while adding more student-teacher conference rooms and a larger library. The Art Institute of Pittsburgh, renamed The Design Alliance, moved to a new facility in summer 2000. The $20 million project involved internal demolition of a historic landmark downtown. Renovation of the 170,000 square-foot building included up-dated electrical wiring and fiber optics, providing the infrastructure for 15 state-of-the-industry computer labs with 400 computers and Internet access for faculty and students alike. New technological capabilities included a digital darkroom, an industrial design technology shop, and video production and post-production facilities.
EDMC received approval by an accrediting organization to offer several new degree programs at the Art Institute International of Minnesota. With 700 students, the school planned to offer Associate of Applied Science and Bachelor of Science degrees in graphic design; interior design; media arts and animation; and Internet marketing and advertising. Associate degrees were also available in culinary arts, as well as in multimedia and web design. EDMC expanded into new markets with its 21st and 22nd schools. Classes commenced at The Art Institute of Washington in Roslyn, Virginia, in summer 2000. The Art Institute of Los Angeles-Orange County, where classes began in July 2000, offered Bachelor of Science programs in media arts and animation and in Internet marketing and advertising.
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In July 2001, EDMC purchased Chicago-based Argosy Education Group, the operator of Argosy University campuses, for $78 million. In 2003, Education Management Corporation acquired South University. Goldman Sachs, Providence Equity Partners and Leeds Equity Partners acquired EDMC and its 70 schools for $3.4 billion in March 2006.
Academic Programs and Locations
The Education Management Corporation (EDMC) owned and operated 22 post-secondary schools nationwide, providing career education to more than 24,000 students from throughout the United States and over 80 foreign countries. The company offered certificates, Associate degrees, or Bachelor's degrees in: culinary arts/management; graphic design; industrial design technology; photography; interior design; computer animation; fashion design/marketing; multimedia and web site design; online media & marketing; interactive multimedia programming; game art & design; and video/audio production. At the National Center for Paralegal Studies in Atlanta, EDMC offered an Associate of Arts degree in legal studies, as well as certificate programs for administrative assistants to the legal profession. EDMC's schools were located in major metropolitan areas in 13 states and Washington D.C.
EDMC faculty were skilled instructors and trained professionals in their fields. EDMC has proudly provided career-focused education for more than 40 years. Our value system is founded in the belief that excellence in education is measured by practical outcomes that enhance the lives of our students, enabling them to make important contributions in their workplace and in their communities. For years, our faculty and staff have been committed to educating students who care about the world around them, and strive to contribute in meaningful ways.
EDMC offered academic programs to students through campus-based and online instruction to earn undergraduate and graduate degrees, and various specialized non-degree diplomas in a range of disciplines comprising business, culinary, design, education, fashion, health sciences, information technology, legal, media arts, and psychology and behavioral sciences.
EDMC's headquarters was located in Pittsburgh, Pennsylvania. The company also had locations in the United States and Canada, offered programs in design, fashion, media and culinary arts.
Challenges and Decline
Starting in the late 2000s, EDMC engaged in lobbying and political advocacy. EDMC established a PAC in 2009 to address politically important industry issues. During the 2010 elections its PAC donated more than $50,000 to organizations of both parties and to politicians including Democratic Congressman Jason Altmire, who opposed the "gainful employment rule", as well as to Republican Congressman John Kline, Democratic Senator Michael Bennet and the DCCC. With other private-sector colleges and universities, EDMC helped form the Coalition for Educational Success in 2010. Represented by Lanny Davis, the CES lobbied for changes to the "gainful employment rule". The coalition persuaded the Department of Education to amend the rule, making vocational programs and programs with the highest debt and lowest loan repayment rates ineligible for federal loans. Private-sector providers were also given time to comply with the changes. EDMC Senior VP of Regulatory Affairs and Strategic Development, Anthony J.
In 2011, EDMC and its then-subsidiary, the Art Institutes, received greater public scrutiny with the release of the Frontline documentary: Educating Sergeant Pantzke. In the documentary, Iraq war veteran Chris Pantzke discussed the lack of disability services at the school. According to Pantzke, "Being a soldier, you don't want to quit, you don't want to give up or fail." But after doing his own research, Pantzke concluded that the degree he was pursuing wasn't "worth much more than the paper is worth".
EDMC has faced significant financial problems, including a 99.9% drop in the value of its stock and a defaulted bond rating (to junk bond status). Under a pending agreement, shareholder stock value will be diluted an additional 96%. Moody's credit rating service in January 2015 dropped EDMC to its lowest rating, D-PD. EDMC's CEO, Edward West, resigned from the company on August 28, 2015, "to pursue other interests".
EDMC faced declining enrollment, legal issues, and accreditation problems, EDMC closed or sold many of its schools between 2013 and 2017. Eighty percent of Education Management's funds came from US government funds, from US Department of Education Title IV programs (Pell Grants and federal student loans), the US Department of Defense, and the Veterans Administration. In 2017, Education Management Corporation sold the existing Art Institutes to The Dream Center Foundation, a Los Angeles-based Pentecostal organization. The sale was complete in October 2017. As of August 2019, eight locations remain open to new students, operated by the Education Principle Foundation, and no longer connected to EDMC or Dream Center.
In 2007, two former EDMC recruiters filed a whistleblower complaint regarding recruitment and compensation practices at EDMC institutions. Department of Justice initiated a federal lawsuit in 2011 on behalf of eleven states and the District of Columbia. The civil lawsuit was filed under the False Claims Act, which allows whistleblowers to file lawsuits when they believe the federal government has been defrauded. The lawsuit seeks to recoup $11 billion, the amount of federal money EDMC institutions received in the form of federal student aid between 2003 and 2011. The Department of Justice argued that EDMC violated federal rules banning incentive-based compensation and therefore acquired the federal funds illegally. In response to the charges, EDMC stated that the compensation plan in question was in compliance with then-current federal rules and had been reviewed and approved by two education law firms. In May 2012, the charges that the compensation plan was illegal were dismissed with other charges allowed to stand. During this time EDMC settled with a former South University recruiter alleging similar practices. A separate whistleblower lawsuit, filed by a former South University recruiter, was initiated in January 2010 and officially filed in March 2012. This lawsuit alleged that the company deliberately misclassified data to inflate the job-placement rates of its graduates and make the school more attractive to prospective students. government when students left their program and that the company misled prospective students about program costs. As of March 2013, both the federal whistleblower case begun in 2007 and the case initiated in 2010 are pending.
In December 2013, EDMC settled a civil claims suit filed by the Colorado Attorney General's Office for $3.3 million. The suit was brought following investigation by the attorney general's office, and alleged that the company's Argosy University in Denver violated the Colorado Consumer Protection Act by engaging in deceptive marketing, in particular misleading students about prospects for employment following graduation. Students had lodged complaints that the school had led them to believe it was pursuing accreditation from the American Psychological Association for its education in counseling psychology program, although it was not. Without the accreditation, students were not accepted to local internships that met the state's licensing standards. As part of the settlement, EDMC agreed to reimburse tuition fees for 66 students, end advertisement of its education in counseling psychology program in Denver as a psychology licensure-track program, and not enroll any further students to the program. As of January, 2015, the Ed.D.
In November 2015, the US Justice Department announced that EDMC will pay nearly $95.5 million to settle claims the company used illegal incentives causing recruiters to use high-pressure tactics to convince students to enroll in the school. As part of the deal, the company will also forgive $102.9 million in loans students borrowed from the company to attend the school. The settlement resolves claims alleged in four whistleblower lawsuits, one of which the government intervened in. In July 2016, a Maine Sunday Telegram expose found that former EDMC CEO John R. McKernan Jr. used a non-profit charity, the EDMC Foundation, to skirt federal 90/10 regulations. In 2010, several EDMC shareholders initiated a lawsuit alleging that EDMC had misled investors prior to the company's 2009 IPO, causing investors to lose money when the company's stock fell in 2010. The lawsuit was later joined by EDMC shareholders OPPRS and SEPTA. In 2016, former nursing students at Brown Mackie College in Tucson, Arizona sued the school, alleging that the poor training they received left them unable to be gainfully employed. The plaintiffs expected to graduate in 2015 until a state nursing board investigation found some of the school's faculty were unqualified and were using veterinary supplies to teach students how to care for human patients.
Bankruptcy and Dissolution
EDMC's financial struggles ultimately led to its demise. The company filed for bankruptcy in 2018 and was subsequently acquired by Dream Center. In 2022, the EDMC schools Argosy University, The Art Institutes, Brown Mackie College, and South University were among 153 institutions included in student loan cancellation due to alleged fraud. The class action was brought by a group of more than 200,000 student borrowers, assisted by the Project on Predatory Student Lending, part of the Legal Services Center of Harvard Law School.
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