Education Management Announces Filing of 8-K With Institution Principal Repayment Rates

PITTSBURGH, Aug. 16 /PRNewswire-FirstCall/ -- Education Management Corporation (Nasdaq: EDMC), a leading provider of post-secondary education, announced today that it has filed a Form 8-K with the Securities and Exchange Commission listing the Title IV loan principal repayment rates for students attending its institutions as of September 30, 2009 based on information provided by the U.S. Department of Education on August 13, 2010.  The Department released the information in order to help post-secondary institutions assess their ability to meet the principal repayment test included in the Department's proposed gainful employment rule, which tests student principal repayment ratios at the program-by-program basis rather than at the institution level. 

Todd S. Nelson, Chief Executive Officer of Education Management, commented, "We appreciate the Department's release of information to help us better understand the proposed gainful employment regulation.  We continue to believe the principal repayment test proposed by the Department as part of the gainful employment regulation is not necessarily reflective of the ability of our former students to repay their Federal student loans, the quality of the programs we offer or the outcomes that our students achieve.  We look forward to continuing to work with the Department to address student debt issues."

The Company noted several issues with respect to the principal repayment rate information provided by the Department:

• The principal repayment test proposed by the Department is based on payments that decreased a loan's principal balance during the last year of the test.  The formula excludes numerous alternative loan payment and deferment plans that permit borrowers to remain current on their Federal student loans without making a principal payment.  Accordingly, many borrowers could be current with their loan payments but not shown as making principal repayments under the Department's test.
• The principal repayment rate calculation does not take into consideration demographic differences that exist across various sectors of post-secondary education. The information released by the Department highlights the significant impact that demographics can have on the principal repayment rate calculation. Proprietary institutions often enroll a higher percentage of at-risk students that may have fewer financial resources to pay for their education. The Department's principal repayment information indicates that proprietary institutions performed similar to public institutions when factoring in the percentage of students who receive Pell grants.  Four-year proprietary institutions with a student population of at least 40% Pell grant recipients had a principal repayment rate of approximately 37%, as compared to four-year public institutions, which had a rate of approximately 38%. The principal repayment rate also does not take into consideration unique differences that exist across certain program fields. As an example, certain graduate level programs did not score well in the calculation, suggesting that repayment activity within a narrow period following graduation is often impacted by lifestyle decisions and the unique characteristics of a profession's career path, and does not reflect program quality.  
• The average principal repayment rate for proprietary institutions as of September 30, 2009 was 36%.  In addition, approximately 36% of proprietary institutions representing 16% of total Fall enrollment at proprietary institutions satisfied the test's higher 45% threshold. In the Notice of Proposed Rulemaking announcing the gainful employment rule, the Department estimated that a higher percentage of proprietary institutions would satisfy the 45% threshold.  

The proposed gainful employment rule was published in the Federal Register on July 26, 2010.  The comment period for the proposed rule expires on September 9, 2010.  The Department has indicated that it plans to issue a final regulation by November 1, 2010, in which case the new regulation would be effective as of July 1, 2011.  

About Education Management

Education Management (www.edmc.edu), with over 136,000 students as of October 2009, is among the largest providers of post-secondary education in North America, based on student enrollment and revenue, with a total of 101 locations in 31 U.S. states and Canada.  We offer academic programs to our students through campus-based and online instruction, or through a combination of both. We are committed to offering quality academic programs and continuously strive to improve the learning experience for our students.  Our educational institutions offer students the opportunity to earn undergraduate and graduate degrees and certain specialized non-degree diplomas in a broad range of disciplines, including design, media arts, health sciences, psychology and behavioral sciences, culinary, fashion, business, education, legal and information technology.

This press release may include information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Securities and Exchange Commission filings. Past results of Education Management are not necessarily indicative of its future results. Education Management does not undertake any obligation to update any forward-looking statements.

SOURCE Education Management Corporation