Daymar College to settle with ex-students

Daymar College, the for-profit Kentucky company accused in multiple lawsuits of duping students into enrolling through bogus claims about job placement and transferring credits, has agreed to pay $1.2 million to ex-students, according to a copy of the tentative deal.

But the proposed settlement would provide only a small portion of the $30,000 or more in federal loans many students incurred before at least some of them ended up working in fast-food restaurants and other low-wage jobs.

The proposed deal and consent decree with the Kentucky attorney general’s office is confidential and plaintiffs who disclose it can be denied benefits, but The Courier-Journal obtained a copy and confirmed the terms.

The agreement calls for Daymar, which once had nine campuses in Kentucky but now has four, to pay $1.4 million to Kentucky Attorney General Jack Conway’s office, which would keep $200,000 in attorney’s fees and money to pay a claims administrator.

Ruling allows ex-Daymar students to sue school

Students who attended Daymar in the five years ending July 27, 2011 would split the rest; the amount for each would depend on how many join the settlement and how many terms they were enrolled. The amount that each student would get is not disclosed in the proposal.

There are 413 private plaintiffs, who would collect an average of $2,900 each if they alone divided the money, but the proposed deal covers all Kentucky students enrolled during that period, meaning individual payments would be far less.

A cover letter to plaintiffs from their private lawyers urges them to accept the deal, saying “after years of litigation it is our belief Daymar does not have the financial ability to pay any additional penalties.”

The proposed agreement and consent decree must be approved by a Daviess Circuit Court judge. As in all settlements, Daymar would deny any wrongdoing or liability.

Paducah lawyer Mark Bryant said the deal does not include federal debt relief for former students, although documents show that some will be forgiven small amounts they owe directly to the college.

In a joint statement issued Saturday, the attorney general's office and Daymar's lawyer, Kenyon Meyer, said, “Daymar and the Office of Kentucky Attorney General Jack Conway have not yet reached a settlement. However, both parties have been cooperating in attempts to reach a fair and appropriate resolution.”

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The tentative deal calls for Daymar to pay an additional fee of up to $250,000 for a compliance monitor and says that former Tennessee Attorney General Robert C. Cooper will be appointed to the position.

Daymar will pay another $350,000 to the plaintiffs’ counsel, who from that sum must pay non-Kentucky plaintiffs $110 per term; they also would be relieved of debts to Daymar, although those relieved of $1,000 or more would not receive any payments.

Under the consent decree, Daymar would be required to inform prospective students about the graduation rate for programs, their median debt and their default rate on loans.

The company also would be required to tell them in a “Know Before You Go” pamphlet that “it is unlikely that any credit earned at Daymar will be accepted at any other institution.”

Daymar would be allowed to tell students about prospective jobs in the field only if the figures it used could be substantiated by government data for the areas where the campus is located.

It would have to provide free, bimonthly career services workshops, including to past employees, a free skills class for first-term students, and set up a hotline that allows students to lodge complaints anonymously.

The compliance monitor also could employ “mystery shoppers” who would pose as prospective students.

Significant violations could be punished by additional penalties under the terms of the deal.

The attorney general’s office began investigating Daymar in 2008 and three years later sued it, alleging that it used deceptive tactics and cheated students on textbook sales, federal financial aid and the quality of their educations.

Conway said Daymar enrolled students who don't meet its own admission standards, leading many to fail and end up with unrecoverable student loan debt. Even if students completed coursework and attempt to transfer, most Kentucky colleges won't accept Daymar College credits, something the school neglected to tell perspective students.

Citing thousands of potential violations of state consumer protection law, the suit asked for damages and restitution that could reach $10 million or more.

In one of several private suits, 15 former Decker students sued it in Paducah, alleging that they also were deceived during the enrollment process.

The lead named plaintiff, Brittany Dixon, said she borrowed $30,000 to attend the paralegal studies program at Daymar only to end up working for $8 an hour at a Sav-A-Lot store.

Demanding that the suits be dismissed, Daymar said the students had agreed to settle any dispute through binding arbitration, but a judge ruled that was unconscionable. The Kentucky Supreme Court allowed the suits to go forward, finding the agreements were technically invalid because students had signed their enrollment applications on the first page and the arbitration agreement was on a second page.

Students sue over Daymar College 'lies'

Dixon and other students declined to comment on the proposed settlement, citing a portion that allows plaintiffs to discuss it only with their spouses, lawyers or financial advisers.

Founded in 1963 in Owensboro, Daymar closed its Louisville campus last year and now operates in Bowling Green, Madisonville, Owensboro and Russellville, as well as in Lancaster, Ohio and in Clarksville, Murfreesboro and Nashville, Tenn. The company’s founder, Mark A. Gabbis of Owensboro, died in 2012, and his estate is one of the parties to the proposed accord.

Daymar’s website says it offers 15 programs in business, criminal justice, health care, and health and wellness and that its “professional faculty brings their passion to the classroom to provide each student with the quality instruction needed to help you be successful on the job and in life.”

Reporter Andrew Wolfson can be reached at (502) 582-7189.

DEBT RELIEF

The U.S. Department of Education says any student who believes that a school committed fraud by doing something or failing to do something may be eligible for loan forgiveness of the federal direct loans taken out to attended the school.

For information about the so-called borrower defense and  how to apply for debt relief based on it, see cjky.it/studentdebtrelief.