A U.S. District Court judge approved a $5 million settlement Thursday in a class-action lawsuit against a for-profit health and technology school that was alleged to have saddled students with thousands of dollars in debt and worthless credentials.
As many as 4,162 students who attended three campuses of the school could benefit from the settlement with Richmond School of Health and Technology, or RSHT, according to attorney Glenn Schlactus of the Washington law firm Relman, Dane and Colfax.
Schlactus said the settlement, signed by U.S. District Judge John A. Gibney in Richmond, will not be enough to cover the entire amount the students owe, “but is really the best result possible, really a good result balancing the substantial risk” of recovering no funds if the case had been litigated.
Students who attended RSHT campuses in Henrico County, Chester or Charlottesville between July 1, 2004, and Feb. 28, 2013, are eligible to file claims, he said.
The exact award will depend on how many of the eligible students file claims. If all 4,162 who are believed to have attended during that period file, the award would be about $800, Schlactus said.
Schlactus said the school continues to operate with one campus under the name of Chester Career College. “But it is the same school operated by the same company, the defendant here,” he said.
A receptionist at the college said no one was available to discuss the suit Thursday.
According to the lawsuit, filed in 2011, RSHT received $5.3 million in federal financial aid in 2008-09, which was more than 86 percent of the school’s revenue. The next academic year, the school received $5.8 million from federal student aid, or 85.8 percent of its revenue.
The suit alleged the school practiced a form of “reverse redlining” targeting racial minorities in violation of federal laws and the Equal Credit Opportunity Act.
The school was accused of deliberately seeking students from poor neighborhoods who were eligible for bigger pools of federal loans and grants.
The suit said RSHT’s student body was disproportionately African-American. African-Americans constituted 75 percent of enrolled students, the suit said, although the Richmond metropolitan area is about 30 percent African-American.
Students who joined the lawsuit said they owed from $10,000 to $20,000 in loans after enrolling in programs that failed to provide the training necessary to receive credentials.
Schlactus said the school defrauded not just students, but also the government because its revenue came from the federal Title IV student aid program.
He said the school induced students to take out loans with promises of improved job prospects.
“They just didn’t deliver,” he said. “Instead they provided what was really a sham education and left folks saddled with debt and no improved earning capacity, and damaged credit.”
Schlactus said the attorney fees will be 25 percent of the settlement. The settlement administrator also will receive a fee.
The claims administrator, BrownGreer, will mail forms to people identified as being part of the class covered by the suit within the next 10 days. Information is available at (866) 897-8900.