The Biden Administration is canceling another $6.1 billion in student loan debt—this time for 317,000 people who attended a chain of for-profit colleges accused of misleading students about the career opportunities their educations would bring. Borrowers who are eligible for forgiveness are being notified this week.
The Art Institutes, which had campuses in several cities, including Miami, Tampa, Atlanta and Houston, abruptly closed last year following investigations by three states and the Department of Education. Investigators found that the schools and their parent company, Education Management Corporation (EDMC) misrepresented graduates’ employment rates, salaries and other information to boost enrollment.
Education Secretary Miguel Cardona describes the schools’ business practices as predatory. “For more than a decade, hundreds of thousands of hopeful students borrowed billions to attend The Art Institutes and got little but lies in return,” Cardona said in a statement.
The Biden Administration is offering this round of forgiveness under the borrower defense to repayment program, which provides debt relief to borrowers who attended a school that engaged in misconduct.
Wednesday’s announcement comes just two weeks after the White House unveiled another $7.4 billion in student loan relief. That plan affects 277,000 borrowers enrolled in the Saving on a Valuable Education, or SAVE program, income-driven repayment plans or the Public Service Loan Forgiveness program. It gives borrowers credit for payments that didn’t previously count toward forgiveness, such as periods when a loan was improperly placed in forbearance.
With the latest round of student loan forgiveness, the total amount of student debt relief sits at about $160 billion for 4.6 million borrowers—including $29 billion for victims of institutional fraud.
Students Attracted With False Promises, Investigators Say
The attorneys general of Iowa, Massachusetts and Pennsylvania launched multiple-year investigations into The Art Institutes and eventually filed lawsuits against the chain and parent EDMC.
The Department of Education reviewed evidence provided by the states for its own investigation and reached these conclusions:
- The Art Institutes advertised a post-graduate employment rate of 80% for those searching for work within six months of graduation. However, the schools’ employment data was inaccurate; it was based on vague job titles and graduates working in fields unrelated to their degrees. The actual percentage was no higher than 57%.
- The institutes misrepresented salaries and income data. One school’s calculation included the income of tennis star Serena Williams, who had attended classes at an Art Institutes campus in Florida.
- The Art Institutes exaggerated its relationships with employers. “In fact, the school had a negative reputation, so companies generally did not want to hire its graduates,” the Education Department said in a news release.
Last year, the Education Department used the borrower defense to repayment program to forgive $109 million in student loan debt for borrowers who attended the University of Phoenix and Ashford University. (Ashford is now known as the University of Arizona Global Campus following a change in ownership in 2020.)
Who Qualifies for This Round of Forgiveness?
Student loan forgiveness is available to borrowers who attended the Art Institutes between January 1, 2004 and October 16, 2017.
Beginning this week, the Education Department will notify borrowers who are eligible for forgiveness. Any loan payments will automatically pause while the Education Department discharges forgiveness funds and adjusts the loan accounts of eligible borrowers. The department will also adjust the eligible borrowers’ credit profiles to reflect loan forgiveness.
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