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EDMC to cut costs, roll out new grant

08/22/2014

TribLive. August 21, 2014.

Education Management Corp. is targeting its employee retirement program as part of ongoing expense cuts and is planning to boost financial assistance for students as the national operator of for-profit colleges tries to boost its struggling business.

The changes outlined Wednesday in an internal email obtained by the Tribune-Review aim to help company survive a difficult period marked by declining enrollments, a federal lawsuit, regulatory pressures and public criticism over rising costs of higher education.

Downtown-based EDMC is temporarily suspending the company match for its 401(k) plan, CEO Edward West told employees in the email. The company is also rolling out a grant program for students at The Art Institutes and exploring ways to simplify its accreditation structure, West said.

A company spokesman declined to comment on the matter because it was a “private email.” The steps follow other measures, including a series of layoffs, that the company has taken to improve its financial health.

“In light of the challenging operating environment, we are pro-actively initiating actions to transform our organization, make education more affordable and better position the company for growth,” West said in the email. “We are focused on three main areas: lowering the cost of education for students, simplifying our regulatory structure, and reducing costs.”

The new “Art Grant” program could slash 20 percent off the cost of education for students at its Art Institutes, West said. It would be rolled out on campuses in the Western United States, but could be introduced at other EDMC schools in the future.

EDMC has focused on lowering the cost for its students to help boost enrollment and retention rates amid changes in federal financial aid programs. Last year, EDMC said it was freezing tuition for students at The Art Institutes of Pittsburgh through at least 2015.

The employee 401(k) retirement plan cuts are “part of a wide-ranging cost-cutting effort,” West said. EDMC is exploring the potential to consolidate “separately accredited institutions,” West said, but offered no details about what that entailed or which schools would be affected.

The school's 110 colleges are accredited through a number of different regional accreditation organizations such as the The Middle States Commission on Higher Education, which renewed Art Institute of Pittsburgh's accreditation last year.

EDMC has 120,000 students across campuses in 32 states and employs 23,000 people, with 2,000 in Pittsburgh.

“Managing multiple education systems across 32 states requires a great deal of time, money and effort,” West said, adding that a simplified accreditation structure would allow the company to introduce programs and degree levels and provide students more choice in degree options and disciplines.

Meanwhile, the company is shedding staff. Since last year, it has slashed more than 600 workers nationwide, nearly half of them in Pittsburgh.

The company is headed for a third consecutive year of revenue declines and is struggling under $1.3 billion in debt. It is a defendant in a federal lawsuit accusing EDMC of paying recruiters according to the number of students they enrolled, violating federal law, and stands to lose hundreds of millions of dollars if a judge rules against it.

In his email, West made no mention of the lawsuit and said that “discussions with our lenders are ongoing.”

“There is a tremendous amount of work being done to create a new capital structure that will provide greater financial flexibility for the company going forward,” he said.

EDMC is not the only for-profit education company facing problems. University of Phoenix and Corinthian Colleges have faced similar allegations over improper recruiting. Corinthian said last month that it was selling 85 of its 107 campuses and online programs amid scrutiny from the U.S. Department of Education