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The nonprofit Dream Center Education Holdings, which owns the Art Institutes, Argosy and South Universities, filed for receivership in federal court last week. The court appointed a receiver Friday.
The company can prevent the universities from closing under a receivership. It also allows DCEH, as the company running the Dream Center institutions is now known, to continue receiving federal student aid and gives the company more time to meet financial obligations.
The Art Institutes enroll about 22,000 students, Argosy University has about 17,600 students and South University has 14,200 students, according to DCEH.
The receivership filing had immediate implications for Argosy, at least. In a letter dated Saturday, the WASC Senior College and University Commission informed the university that the filing -- along with information the accreditor had received that the U.S. Education Department had placed restrictions on Argosy's receipt of federal student aid funds -- put the university out of compliance with the agency's standards. As a result, WSCUC said, Argosy will lose its accreditation within a year unless it can show cause to the accreditor why it should not.
DCEH largely placed the blame for the company's poor performance on Education Management Corporation. The Dream Center purchased the universities from the for-profit EDMC in 2017 and converted them into nonprofit entities.
"Within 60 days of the final closing and after completing the opening balance sheet audits DCEH discovered that the actual revenues fell far short of the projections provided by EDMC, in an amount in the tens of millions of dollars, while overhead fixed costs were significantly in excess of the EDMC’s representations. DCEH’s efforts to instill best practices organization-wide and reduce enormous corporate inefficiencies clearly would not be enough to balance what was now projected to be a substantial operating deficit," according to the court filing.
The nonprofit stated there was additional stress on the company because of "high fixed expenses, principally driven by large leased facilities" at the universities. DCEH forecast months ago that it would not be able to meet its financial obligations by December 2018. About 30 DCEH colleges closed at the end of last year.
The company is also in negotiations to sell Argosy and possibly South University of Ohio to Eastern Gateway Community College in Ohio, according to the filing. The community college wants to use Argosy's facilities to provide career training to thousands of workers displaced by General Motors' Lordstown, Ohio, plant closing. The receivership would allow those negotiations to continue. The filing doesn't specify which Argosy campuses the Ohio college is interested in purchasing, but South University of Ohio is in Cleveland.
DCEH said it is working with accreditors and the U.S. Department of Education to reorganize and preserve existing campuses.
The Minnesota Office of Higher Education is also working with the department and Argosy leaders to prevent a campus with about 1,000 students near the Twin Cities from abruptly closing.
Education Principle Foundation, a Delaware nonprofit, also announced Friday it acquired some DCEH properties. The foundation now controls Art Institutes campuses in Atlanta; Austin, Tex.; Dallas; Miami; Houston; San Antonio; Tampa, Fla.; and Virginia Beach. It also acquired South University campuses in Alabama, Georgia, Florida, South Carolina, Texas and Virginia. Not much information exists about the foundation's ownership.
"The foundation will not be involved in the operations of the Art Institutes or South University," according to a news release. "Each university system will be governed by a board of trustees comprised of a majority of independent members."
The acquisition requires final approval from accreditors and the Education Department.
