Brown Mackie College — A 20-Campus Chain That Died When Its Parent Did

Summary

Brown Mackie College was a national chain of small career colleges, with roots reaching back to an 1892 business school in Salina, Kansas, that was absorbed in the 2000s into the Education Management Corporation (EDMC) — one of the four largest for-profit education companies in the United States. In June 2016, EDMC announced it would stop enrolling new students at the overwhelming majority of Brown Mackie's roughly two dozen campuses and wind them down through teach-out. By the time the dust settled, more than 20 locations were gone, the brand had effectively ceased to exist, and the handful of survivors had been folded into the wreckage of EDMC itself.

What makes Brown Mackie unusual among the for-profit collapses is that it was not, principally, killed by its own fraud. It was killed by its parent's. EDMC had built an empire — the Art Institutes, Argosy University, South University, and Brown Mackie — that at its 2011 peak enrolled more than 158,000 students across some 110 campuses. That empire was built on the same machine every large for-profit ran: federal Title IV aid converted into corporate revenue, and aggressive recruiting to keep the conversion going. In November 2015, EDMC settled a federal False Claims Act case for $95.5 million over an illegal incentive-compensation scheme for recruiters, and separately agreed to forgive roughly $102.8 million in loans for some 80,000 students it had misled. The reputational damage, the regulatory weight, and a collapsing stock price did the rest.

Brown Mackie was the small, low-margin division at the edge of a sinking company, and it was the easiest piece to cut. EDMC said the closures reflected falling demand for Brown Mackie's programs — medical assisting, criminal justice, business — in fields where the resulting wages no longer justified the loan debt. That was true as far as it went, but it was also the tidy explanation a foundering parent gives for shedding a subsidiary it could no longer afford to defend. The students mid-program were promised a teach-out; many got one, and many did not finish anyway.

The closure was not the abrupt, doors-locked-overnight collapse that defined Corinthian or, later, Vatterott. It was a managed wind-down — campuses stopped admitting, taught out the enrolled, and went dark in sequence through 2016 and into 2017. The mercy was relative. Students at a credit-bearing institution whose credits rarely transferred, holding debt for credentials a soft labor market did not want, were left roughly where every for-profit closure leaves its students: with the bill, and not much else.

Timeline

The Inherited Brand

Brown Mackie did not begin as a fraud, or even as a chain. It began in 1892 as a single Kansas business school, and for most of a century it was the unremarkable, locally honest thing its name implied: a place that taught bookkeeping and office skills to people who wanted a job. The Brown Mackie School of Business, incorporated under that name in 1938, was a trade school, not a confidence scheme. Its sin was not in what it was but in what it became when a large company bought the name and stretched it across the country.

That happened in the 2000s, when Education Management Corporation — flush with the federal aid pouring into the for-profit sector — acquired a set of existing career schools and rebranded them all as Brown Mackie College. A regional name became a national franchise overnight, not because anything about the original school had scaled, but because a holding company found it convenient to operate under a single banner. By 2013 there were 28 Brown Mackie campuses enrolling some 17,000 students across roughly 15 states, offering associate degrees and short certificates in medical assisting, criminal justice, business, and the like. None of the longevity in "since 1892" had transferred. Only the name had.

This is the quiet pathology of the for-profit roll-up: an old, modest, regional school's reputation gets purchased and spent. The students enrolling at a 2010s Brown Mackie campus were not buying into a 121-year tradition; they were buying into EDMC's recruiting machine, wearing a borrowed coat of age and respectability. The coat was the most valuable thing the original Salina school had to offer, and EDMC wore it until it wore out.

The Parent's Sins

The machine underneath Brown Mackie was EDMC's, and EDMC's machine was in trouble. The company had become, by the early 2010s, one of the largest for-profit education firms in the country, with the Art Institutes and Argosy University and South University and Brown Mackie together enrolling more than 158,000 students at its 2011 peak. Like every large chain of the era, it lived on Title IV aid, and its growth depended on recruiting — which is where the law caught up with it. In May 2011 the U.S. Department of Justice filed a False Claims Act suit alleging EDMC had paid its recruiters illegal incentive compensation tied to the number of students they enrolled, a practice federal law forbids precisely because it turns recruiters into commissioned salespeople with every reason to sign up anyone.

In November 2015 EDMC settled that case for $95.5 million, and in the same period agreed, with 39 states and the District of Columbia, to forgive about $102.8 million in loans for some 80,000 former students it had deceived about costs and outcomes. These were the headline penalties, but the deeper damage was to the franchise itself: the stock had already collapsed and been delisted from NASDAQ in November 2014, lenders had downgraded the company to junk, and the whole enterprise was running on fumes. A company in that condition does not have the cash, the credibility, or the will to prop up its weakest division.

Brown Mackie was the weakest division. Its programs were small, its margins thin, and its enrollment — already down from 17,000 to about 7,773 by mid-2016 — falling fast. When EDMC explained the closures, it pointed to that softening demand: fewer students wanted medical assisting, and the jobs those programs led to paid too little to justify the loans. The explanation was not false. But it was also the convenient framing of a parent that could no longer carry a subsidiary, dressed up as a market judgment rather than a confession of collapse. Brown Mackie did not die of its own scandal. It died because the company that owned it had spent its credibility everywhere else.

The Five Factors

Aftermath

Brown Mackie's students scattered into the familiar diaspora of a for-profit closure. Those who could finish in the teach-out window did; those who could not were left holding credits that traditional colleges generally would not accept, and debt that the closure did nothing to erase. Students who were enrolled when their campus shut had a path to a federal closed-school loan discharge, but it covered only those caught at the very end — not the tens of thousands who had passed through Brown Mackie over the EDMC years and graduated into the soft labor markets the company eventually cited as its reason to quit. Faculty and staff at more than 20 campuses lost their jobs across 2016 and 2017.

The larger story is EDMC's, and it got worse after Brown Mackie. The sale of the remaining schools to the Dream Center Foundation in October 2017 placed Argosy University and the Art Institutes in the hands of an inexperienced operator that collapsed in 2019, producing exactly the abrupt, aid-withholding catastrophe that Brown Mackie's managed wind-down had avoided. EDMC itself liquidated in Chapter 7 in June 2018. The four-company empire that had enrolled more than 158,000 students at its peak was, within a few years, entirely gone. Brown Mackie was simply the first of its limbs to be amputated — the small one, cut early, while there was still a surgeon to do it neatly. The 1892 Kansas business school left no campus and no continuing institution; it left a brand name retired in a bankruptcy, and a cohort of students paying for degrees from a school that no longer exists.

Lessons

References

• Decreases in enrollment lead to Brown Mackie closing Inside Higher Ed
• For-profit veterinary technology programs continue to close American Veterinary Medical Association
• Brown Mackie College Wikipedia
• Education Management Corporation Wikipedia