Pittsburgh-based Education Management Corp. has cleared a major hurdle in its quest to sell 31 Art Institutes and two other educational systems to a California nonprofit.
The U.S. Department of Education confirmed it has granted initial approval of the $60 million sale, which would shift roughly 60,000 students and 15,000 employees controlled by the for-profit education company to The Dream Center Foundation, a Los Angeles-based philanthropic organization affiliated with a Pentecostal church.
Education department officials have concluded that “no current impediments” stand in the way of the sale, press secretary Liz Hill wrote in a statement to the Pittsburgh Post-Gazette. BuzzFeed News first reported the finding this week, citing internal emails.
The department reached its conclusion after a “preacquisition review” of EDMC’s proposal — filed around the time the company announced the deal in March — and the decision does not constitute final approval.
“The department has laid out clear criteria each university must meet as well as conditions it would impose if it were to approve any change of ownership,” Ms. Hill wrote. “We also notified the parties of additional documents and information that must be submitted for the department to conduct its final review.”
In addition to the EDMC deal, the department also found no problems with Purdue University’s intent to purchase for-profit Kaplan University, Ms. Hill wrote.
Taken together, the decisions indicate the Trump administration and Education Secretary Betsy DeVos will not stand in the way of for-profit schools that seek to exit the maligned for-profit education industry by converting or selling to nonprofit entities.
The EDMC sale has been controversial as details of the financing and possible conflicts of interest have remained unclear as regulators and accreditation agencies meet behind closed doors to consider it.
Dream Center’s ties to longtime for-profit education investors have raised questions about whether it is possible for problems that undermined EDMC’s schools in recent years — predatory recruiting practices that saddled students with debt — to be cured under the ownership of a nonprofit that has no experience running higher education institutions.
Some accreditors have found initial problems with the deal.
In June, the regional accreditor for the Art Institute of Pittsburgh and Art Institute of Philadelphia rejected the sale due to “insufficient information and evidence.” Since then, the agency, Philadelphia-based Middle States Council on Higher Education, confirmed that EDMC has submitted additional information for reconsideration at its November meeting.
Meanwhile, the Western Association of Schools and Colleges conditionally approved the sale of EDMC’s Argosy University, based in Los Angeles area — but not without significant questions. It plans a follow-up meeting in October to examine “the possibility of conflicts of interest” and to press for details on how the school system would operate after the sale closed.
EDMC officials did not immediately return requests for comment on Wednesday.
Daniel Moore: dmoore@post-gazette.com, 412-263-2743 and Twitter @PGdanielmoore.
First Published: September 20, 2017, 3:41 p.m.
