The Art Institutes

The Art Institutes are a collection of for-profit art schools that are owned by Education Principle Foundation and the remnants of two failed parent companies: for-profit college operator Education Management Corporation (EDMC) and Dream Center Education Holdings (DCEH).[3] [4][5][6]

Not to be confused with Art Institute of Chicago, School of the Art Institute of Chicago, Kansas City Art Institute, or San Francisco Art Institute.

The Art Institutes
The Art Institutes logo
MottoThe hardest thing you'll ever love.[1]
Established1969 (1969)
Location
Pittsburgh
,
Pennsylvania[2]
,
United States
Websitewww.artinstitutes.edu

According to the Republic Report, the court appointed receiver, Studio Enterprise & South University had until April 11, 2019 to negotiate to separate both South University schools and the remaining Art Institute schools from the Dream Center Education IT Platform by September 11, 2019. "Should they fail to agree, the plan of reorganization will likely fail, thereby dooming South University and the Art Institutes".[7]

Student loan debtors have appealed to the US Department of Education for debt cancellation through defense to repayment claims. These efforts are premised on the allegations that they were defrauded.[8] Students who attended the school during the time it closed may also be eligible for student loan cancellation.[9] However, the Trump-DeVos administration has been unwilling to act in favor of students.[10] The student debt group "I Am Ai" has acted as a support group for students and former of the Art Institutes, offering advice about debt cancellation.[3] although it is unclear exactly which debts were cancelled, a report of $11 million in student debt was subsequently cancelled when DeVos and Trump finally buckled under pressure from I am AI in November, 2019.

History

At its height, The Art Institutes, as a for-profit college entity, had more than 50 campuses. However, as the for-profit education sector came under scrutiny, many campuses saw a marked decrease in enrollment. At least 35 schools closed in 2017–18, leaving about a dozen schools under two separate owners.[11][12]

The Art Institutes system was created in 1969 when Education Management Corporation (EDMC) acquired The Art Institute of Pittsburgh,[13][14][15] which was founded in 1921.[16]

The Art Institutes' former parent company, Education Management Corporation (EDMC), was headquartered in Pittsburgh, Pennsylvania.[17] In November 2014, EDMC was delisted from the NASDAQ amid financial difficulties, lawsuits, and investigations[18] and its stock was valued at less than one cent per share.

Growth (2000-2009)

Starting in 2000, The Art Institutes began offering bachelor's degrees[19] and, in 2001, launched its distance education program, Art Institute Online, which began offering bachelor's and non-degree programs online.[15][20]

Throughout the 2000s, The Art Institutes expanded through the acquisition of existing art colleges and the establishment of new Art Institutes.[21] In 2001, there were around 20 campuses of The Art Institutes;[15] this grew to approximately 30 locations in 2006[22] before reaching 50 Art Institutes in 2010.[23]

EDMC's initial public offering (IPO) was in 2009. Todd S. Nelson, who was previously the CEO of Apollo Education Group, became an EDMC board member in 2007 and the Chairman of the Board of Directors in 2012.[24]

In 2011, Frontline released a documentary titled 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." After doing his own research, Pantzke concluded that the degree he was pursuing wasn't "worth much more than the paper is worth," and felt he was "throwing away taxpayer money" by using GI Bill funds.[25]

In 2012, The Art Institute schools began to experience a decrease in the number of new students enrolling, seeing enrollment numbers drop by approximately 20 percent between the second quarter of the 2012 fiscal year and the start of 2013. EDMC has attributed the drop in enrollment to limited access to Parent Loan for Undergraduate Students and the economic recession.[13] In February 2013, EDMC announced plans for a three-year-old tuition freeze at The Art Institutes. Under this plan, the company pledged to maintain the current cost of tuition through 2015.[26]

In June 2013, EDMC announced that its President John Mazzoni would resign effective July 14, 2013, after 27 years at the organization. Charles Restivo, Group Vice President, would become the Interim President of The Art Institutes.[27] In 2014, the US Department of Education reported that ten EDMC campuses, including several Art Institutes, were placed under heightened cash monitoring. The Art Institute of Pittsburgh was one of the schools listed.[28]

In May 2015, EDMC announced that it would be closing 15 of the Art Institute locations. "A total of 5,432 students are enrolled among the campuses that are slated to close, according to a list provided by EDMC. The company will undergo a teach out process at each location, meaning each campus will continue to offer courses, student services and placement assistance until the last student has graduated, according to Hardman."[29] Campuses slated to close included those in Atlanta, New York City, Ohio, Texas and Pennsylvania. In January 2016, EDMC announced that additional Art Institutes would be ceasing enrollments. These campuses are The Art Institute of California – Los Angeles, The Art Institute of St. Louis, and the Art Institute of Tucson.[30] At least 200 additional employees were laid off in May 2016.[31] In June 2016, EDMC announced that the Art Institutes International Minnesota would be ceasing enrollments. That meant a total of 19 Art Institute campuses were scheduled to close.

In June 2016, Tim Moscato, chief operating officer at the Art Institutes, resigned amid more downsizing.[32] The same month, the US Department of Education voted to end ACICS power to accredit.[33] ACICS was stripped of its power to accredit in September.[34] On September 8, 2016, Art Institutes students known as "I Am Ai" presented a notice to the Director of New England Institute of Art (NEIA) about a lawsuit that would be coming in 30 days.[35] The lawsuit is being written by the Legal Services Center of Harvard Law School.[36] On September 24, 2016, the Attorney General of Massachusetts expressed concern that the teaching duties at NEIA were being taken over by an unlicensed Indian company with no background in teaching US art students. The AG's Office stated that if a proper education for NEIA students could not be ensured, that NEIA should shut down at the end of the 2016.l[37] In December 2016, nine additional Art Institutes were placed on probation by their accreditor, Southern Association of Colleges and Schools (SACS).[38]

Politico added that an Indian company might be buying the Art Institute of New York City and NEIA.[39]

Dream Center Education, More Closures (2017-2019)

In 2017, Education Management Corporation reported that it had sold the existing Art Institutes to The Dream Center Foundation, a Los Angeles-based Pentecostal organization.[40][41] The sale was complete in October 2017.[42] In July 2017, an accrediting agency, Middle States Association, rejected the sale of the Pittsburgh and Philadelphia Art Institutes to the Dream Center Foundation.[43]

In January 2018, Art Institutes locations in Novi and Denver as well as the Illinois Institute of Art locations in Chicago and Schaumburg lost their accreditation with the Higher Learning Commission. They did not inform students about the loss of accreditation until June despite being required to disclose this at the time of the loss.[44] In 2018, Dream Center Education Holdings reported that more AI campuses would be closing.[45] In 2019, as many as 13 Art Institute campuses may remain open.[46][47] However, the remaining schools face financial struggles in 2019.[48] In December 2018, 23 Art Institutes were closed.

In January 2019, The Washington Student Achievement Council suspended AI-Seattle's license to operate, which blocks enrollment of new students. The council will reinstate the license when Dream Center Education Holdings shows that it has "regained financial solvency or completed a viable reorganization."[49] AI Las Vegas also received a show cause notice from ACICS requesting that the school provide information showing why it should not lose its accreditation.[50]

In January 2019, DCEH chairman Randall Barton stated that the Art Institutes, excluding the Art Institute of Pittsburgh, Art Institute of Las Vegas and Argosy University campuses, have been transferred to the Education Principle Foundation.[51][49][52] Also in January 2019, Dream Center Education Holdings announced that AI schools, excluding AI Pittsburgh, AI Las Vegas, and Argosy campuses, had been transferred to the Education Principle Foundation with help from the US Department of Education.[51] Inside Higher Ed described Education Principle Foundation as "a Delaware nonprofit with no annual budget and almost no internet presence", and linked it to private equity firm Colbeck Capital Management.[53] Studio Enterprise, a Los Angeles company tied to Colbeck Capital Management, was also involved in the ownership transfer.[54]

In February 2019, A federal court-appointed receiver halted Dream Center Education Holdings' plans to close the Art Institute of Pittsburgh on March 31, 2019.[55]

Art Institute students from closed schools have been directed to DCEH's partner institutions, including other for-profit colleges: DeVry University, Walden University, and Trident University.[56]

In March 2019, teachers and other staff had not been paid their final pay checks.[57]

As of August 2019, 8 Art Institutes campuses, in Florida, Georgia, Texas and Virginia, continue to enroll students.

Schools and programs

The Art Institutes offer degree programs at the associate's, bachelor's and master's levels, as well as non-degree diploma programs. Areas of study include graphic design, media arts and animation, culinary arts, photography, digital filmmaking and video production, interior design, audio production, fashion design, game art and design, baking and pastry, and fashion marketing.[58]

The Art Institutes in Fort Lauderdale, Indianapolis, Kansas City, Las Vegas, Minnesota, New York City, Phoenix, Saint Louis, Salt Lake City, Tucson, Vancouver, Wisconsin, and York were accredited by ACICS,[59] which has lost its accreditation power from the US Department of Education.[34]

Nine additional Art Institutes (The Art Institute of Atlanta, The Art Institute of Houston, Miami International University of Art and Design) and their branch campuses in Charleston, Nashville, Arlington, Virginia Beach, Austin and San Antonio were placed on probation by their accreditor, Southern Association of Colleges and Schools (SACS), in December 2016.[38]

In August 2018, the Pittsburgh Tribune-Review reported that the Art Institute of Pittsburgh may lose their accreditation in 2019.[60]

Continued layoffs and downsizing at the remaining campuses occurred in late 2018 [61] and 2019.[62]

Locations

Education Principle Foundation schools and their accreditors

DCEH schools and their accreditors

Closed or sold campuses

Teach-outs

Teach-outs are a period of time when new student enrollment has stopped, and remaining students are given a period of time to finish their programs.[69] In May 2015, EDMC spokesperson Chris Hardman stated that the teach-outs would take two to three years.[70]

Student outcomes

According to the College Scorecard, the Art Institute of Atlanta has a 19 percent graduation rate, a typical debt of $30,982, a 28 percent student loan repayment rate, and a median salary after attending of $30,900.[71]

Accreditation issues

The Art Institute of Las Vegas is accredited by ACICS; however, the Interior Design Bachelor of Arts, Media Arts & Animation Bachelor of Science, Baking & Pastry Associate of Science, Culinary Arts Diploma program were placed on student achievement show-cause due to material non-compliance with its retention rate standard of 60%.

Art Institute of Pittsburgh was placed on probation by the Middle States Commission on Higher Education because of insufficient evidence that the institution is currently in compliance with Standard II (Integrity), Requirement of Affiliation 14, and the Related Entities Policy. The school will go through a probationary period until accreditation is reaffirmed or lost. The school had until March 2019 to submit information to show why the agency should not remove the school's accreditation.[72]

The regional accreditor, the Higher Learning Commission, voted on whether or not to hold a vote to impose their Change of Control policy after the sale from EDMC to DCEH to the following campuses: Chicago, Schaumburg, Colorado, and Michigan. Moving them from accredited to candidacy status for a minimum of six months. Any credits earned after February 2018 are unaccredited institutionally.

Heightened cash monitoring (HCM)

As of June 1, 2016, twelve Art Institute campuses were under heightened cash monitoring (or HCM1) by the US Department of Education because colleges are required to hold a certain amount of money to meet obligations in case the school closes prematurely. Campuses affected were Pittsburgh, Portland, Philadelphia, Atlanta, Fort Lauderdale, Minnesota, Colorado, Houston, Seattle, New York City, York, and Phoenix.[73]

Between 2000 and 2018, the Art Institutes parent company EDMC was subject to numerous lawsuits from former students, former faculty, and government agencies. Thousands of former students of the Art Institutes claim they have been deceived and misled by the schools and their recruiters and have filed claims with the US Department of Education.[74][75][76] Art Institute students are able to file defense to repayment claims with the US Department of Education.[69]

In October 2000, EDMC announced the settlement of a lawsuit brought by a group of approximately 350 former students of The Art Institute of Houston.[77] The plaintiffs claimed that "they were misled about the nature, quality and utility of the education they would receive at The Art Institute of Houston."

From 2011 to 2015, EDMC was involved in a United States Department of Justice investigation and lawsuit alleging both illegal recruitment practices by EDMC schools, including The Art Institutes, and fraudulent receipt of $11 billion in federal and state financial aid money.[78][79][80][81] A 2011 US DOJ report claimed EDMC "created a 'boiler room' style sales culture and has made recruiting and enrolling new students the sole focus of its compensation system."[82]

In May 2013, a federal judge in Pennsylvania rejected a bid to dismiss a lawsuit against EDMC by a former EDMC employee. The lawsuit alleges that the corporation and its affiliates engaged in a scheme to maximize profits from financial aid programs administered by the U.S. Department of Education. The complainant in the case, Jason Sobek, who worked as an admissions director for EDMC in Pittsburgh from June 2008 through November 2010, alleges that the firm falsified information given to the Department of Education that indicated they were in compliance with the loan programs' eligibility requirements. In testimony that provided the basis for the lower court's decision last October, Sobek alleged that EDMC operated a "carefully crafted and widespread for-profit education scheme [in which] defendants have defrauded the United States and its taxpayers out of millions of dollars in the form of federally backed student loans and grants."[83]

In 2014, an investigation by the City Attorney of San Francisco's office led to a $4.4 million settlement. The city claimed AI used deceptive marketing tactics resulting in underestimated program costs for students and inflated job placement figures for graduates.[84]

In November 2015, EDMC agreed to pay $95.5 million to settle claims of illegal recruiting, and consumer fraud. U.S. Attorney David Hickton said "Today's global settlement sends an unmistakable message to all for-profit education companies: the United States will aggressively ferret out fraud and protect innocent students and taxpayer dollars from this kind of egregious abuse."[75]

In April 2016, two former AI teachers filed suit in Alameda City Superior Court claiming EDMC did not pay them a minimum wage or provide adequate rest periods, in order "to reduce compensation and increase its own profits."[85]

On July 6, 2017, two former Art Institute students filed a lawsuit against Secretary of Education Betsy DeVos for illegally delaying rules intended to protect borrowers' rights. They were represented by the Project on Predatory Student Lending and Public Citizen in two lawsuits.[86] This lawsuit helped clear the way for 2016 Borrower Defense Rule to take effect.[87]

In 2018, Dream Center Education Holdings took control of the remaining 31 Art Institutes schools. In December 2018, Art Institute students filed a lawsuit in the Circuit Court of Cook County, claiming that Dream Center Educational Holdings failed to notify students it had lost institutional accreditation at four Illinois AI campuses.[88]

In 2019, reports from DCEH's monitor, Marc Dottore, indicated that $9–13 million of federal funds, meant for students stipends, is missing.[89][90] According to thePittsburgh Post-Gazette, the monitor is "nearly out of cash to manage the entities he’s tasked to oversee."[91] Dottore has written to the Department of Education that Studio Enterprise, a company designated to service former and current DCEH schools, is taking service fees from the deal without providing any services, draining badly-needed cash from the operation.[92] Information about the Education Principle Foundation is limited, but it appears to be formerly known as the Colbeck Foundation.[93] According to the Republic Report, the Colbeck Foundation has ties to Studio Enterprise.[94]

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