Pittsburgh-based Education Management Corp. is selling more than 60 postsecondary schools nationwide to a Los Angeles-based nonprofit human services provider, EDMC CEO Mark McEachen announced Friday.
Southern California’s Dream Center Foundation will acquire “substantially all of the assets” of EDMC, including three university systems, its faculty and staff and the majority of EDMC’s corporate office workers, McEachen said. He touted the deal as a fresh start or “rebirth” for the national network of schools, which combined have more than 60,000 students across 31 states.
“This is a celebration,” McEachen said. “There are nothing but good things to come out of this transaction.”
The Art Institute of Pittsburgh is among schools being acquired by the Dream Center, which already has a presence in 41 states and 21 countries.
None of the roughly 15,000 employees working at the affected properties will lose their jobs, McEachen said. EDMC has laid off more than 2,500 people since McEachen took the helm in 2015.
Following the sale, McEachen said he expects students to benefit from more stable tuition rates, new financial aid options and other advantages the Dream Center has as a tax-exempt entity in the human services field.
“We’re entering into this transaction on the behalf of students,” McEachen said. “We are not doing this, I assure you, on behalf of the balance sheet because we could have sold it to higher bidders.”
McEachen declined to share the price of the sale, which he expects to be completed by late summer.
The transaction marks a strategic decision by the controversy-riddled, for-profit company based in Downtown Pittsburgh to get out of the business of operating higher education programs.
“At the close of this transaction, EDMC will no longer enroll students,” McEachen said. “They will operate completely independently. EDMC will have no further obligation to or from those schools.”
The acquisition follows several years of financial struggles, public relations problems and sagging enrollment plaguing EDMC, which enrolled almost 160,000 students at its peak in 2011.
Creditors assumed control of the company in 2015 in exchange for erasing $1.3 billion in debt.
With McEachen at the helm, the new owners agreed to pay $95.5 million to settle a whistle-blower lawsuit that accused EDMC of paying recruiters based on the number of students they enrolled, a violation of federal law.
After settling the legal issues, McEachen and his team set to work to “right-size” EDMC and map its future.
Multiple for-profit entities had interest in purchasing EDMC’s assets — but McEachen said they seemed too focused on the bottom line.
The nonprofit Dream Center had been seeking for three years a major educational acquisition to build on its nonprofit work, which aims to “help those who are on the lower rungs of the socioeconomic ladder transform their lives,” said Randall Barton, the Dream Center’s managing director.
Dream Center officials plan to create new development and fundraising positions at the newly acquired schools. They also pledged to invest a percentage of school revenues into charitable efforts, including help for homeless veterans, foster youths and high school dropouts who need help obtaining GEDs.
Schools that will retain their independent boards of trustees, staff and faculty as they become acquired by the Dream Center Foundation include South University, Argosy University, Western State College of Law at Argosy and the arts institutes in Pittsburgh and Philadelphia.
“South University is very well run and is a high quality institution as is Argosy and the law school,” Barton said. “The Art Institutes will probably involve the most change.”
Those changes include hiring a new provost and curriculum revisions to respond to a recent federal warning. Ten of the Art Institute of Pittsburgh’s programs failed a new federal test aimed at measuring whether typical graduates make enough money to handle paying off student debt.
“Although nonprofits are not subject to gainful employment,” Barton said, “we want every degree to lead to a good job.”
University operations will be managed through Dream Center Education Holdings LLC, led by newly named CEO Brent Richardson. Richardson is a longtime higher education administrator who helped expand the reach of Grand Canyon University in Phoenix.
EDMC will continue to exist as a legal entity, dealing with leftover debt and operating schools previously marked for closure until their final students graduate.
The company’s leadership has yet to decide on a new vision or long-term plan.
“We don’t know what we’ll do; that will be up to the Board of Directors to decide,” McEachen said. “What we don’t want to do is get back into enrolling students in the higher education space.”