Kentucky Attorney General Jack Conway's legal fight with Daymar College concluded Thursday with a $12.4 million settlement aimed at providing debt forgiveness and cash payments to thousands of former students at the for-profit institution.
Daymar agreed to provide $1.2 million to be distributed to qualified students who attended the college over a five-year period ending in July 2011, Conway said. The college also agreed to forgo collecting $11 million in debt owed by former students over a six-year span ending in July 2012, he said.
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More than 12,000 students will be eligible for debt relief, payments or both, Conway said.
The settlement requires the Owensboro-based career college to provide enhanced disclosures for students, Conway said. That includes a 21-day, risk-free refund period for most students — a provision that Conway hopes becomes a model among for-profit schools.
The settlement stems from a lawsuit filed by Conway's office in July 2011 accusing Daymar of multiple violations of Kentucky's Consumer Protection Act. Wrangling over the lawsuit spanned most of Conway's second term as attorney general.
"This settlement is going to provide assistance to those that were harmed, and it's going to ensure that future students are provided with accurate and financial information about Daymar's degree programs," Conway said at a press conference.
Daymar continued to deny any wrongdoing in settling the lawsuit. The school said it has 533 students enrolled at multiple Kentucky campuses.
"Our company policy has always demanded adherence to all laws, rules and regulations everywhere we operate, and we take our compliance obligations very seriously," said Daymar President and Chancellor Dan Peterson. "This is a decision to avoid the continued expense and time associated with litigation so that we can fully focus on educating our students."
Former Tennessee Attorney General Robert E. Cooper Jr. will serve as court-appointed compliance monitor in the matter, Conway said.
Cooper's stint will last two years, and he'll have means to ensure the school complies with settlement conditions.
Cooper can assign "secret shoppers" to pose as prospective students during the school's recruitment and admissions process. He also can conduct campus visits, review complaints, observe admission and financial services training, review student files and interview Daymar employees and students.
"I hope and expect that this will be a collaborative process and not an adversarial one," said Cooper, who met with Daymar senior officials.
A court-appointed claims administrator will coordinate distribution of payments to former Daymar students, Conway said. The administrator will send packets to qualifying students starting Oct. 26. Students must return information requested on the claims form by Dec. 9.
About 7,400 students are eligible for cash payments, and about 6,300 can get debt relief, Conway said. Payments will be prorated based on the number of terms students completed and number of claims received. Debt relief is expected to average about $1,725 per student, Conway said.
Time spans determining eligibility roughly paralleled the time period for the statute of limitations, he said.
The settlement also applies to students who were enrolled during those periods but filed separate lawsuits against Daymar.
Conway's office accused Daymar of denying students access to financial aid to buy textbook from vendors other than Daymar's bookstores, which allegedly charged higher prices. Daymar also was accused of misrepresenting students' ability to transfer Daymar credits, admitting students who failed Daymar's admissions assessment and hiring unqualified faculty.
The settlement allows the attorney general's office to keep $200,000 in legal fees.
Conway is the Democratic nominee in this year's election for Kentucky governor. His opponent is Republican Matt Bevin.