The Biden administration will forgive $6.1 billion in debt held by 317,000 former students of the defunct for-profit chain the Art Institutes, marking one of the Education Department’s largest group discharges of federal student loans.

The decision covers people who were enrolled at any Art Institute campus from Jan. 1, 2004, to Oct. 16, 2017, a period in which Education Management Corp. (EDMC) owned the chain of schools. The Education Department will on Wednesday begin notifying eligible borrowers, who are not required to take action. The agency said it also will refund payments that former students have made on loans that are earmarked for forgiveness.

The Biden administration has chipped away at debt-relief claims filed by hundreds of thousands of students who say they were defrauded by their colleges. Demetrius Freeman/The Washington Post

“This institution falsified data knowingly misled students, and cheated borrowers into taking on mountains of debt without leading to promising career prospects at the end of their studies,” President Biden said in a statement. “While my predecessor looked the other way when colleges defrauded students and borrowers, I promised to take this on directly to provide borrowers with the relief they need and deserve.”

Since taking office, the Biden administration has chipped away at debt-relief claims filed by hundreds of thousands of students who say they were defrauded by their colleges, mostly for-profit institutions. The Trump administration had tried to limit and delay loan cancellations for those borrowers, complaining that it was too easy for them to shirk their debt obligations. In the past three years, the Education Department has approved $19.7 billion in discharges for 1.3 million students under a statute called borrower defense to repayment, which lets the agency cancel federal student loans when colleges violate students’ rights and state law.

In the case of the Art Institutes, the department said the chain engaged in widespread misrepresentations about its job placement rates and relationships with employers to get students to enroll. Although the school advertised that more than 80 percent of graduates obtained employment in their related field within six months, the department found that the figure was closer to 57 percent.

The school promised students ongoing career services, but former employees and borrowers said once students graduated school staff did not return their calls. Staff also admitted to falsifying graduate earnings data, giving prospective students the impression that an education from the Art Institutes would guarantee success. Students took on high amounts of debt under false pretenses, according to the department. Many borrowers dropped out of their programs and defaulted on their loans.


“Far too many for-profit institutions prey upon students, especially first-generation college students, selling them impossible guarantees and flashy brochures,” U.S. Education Secretary Miguel Cardona said on a call with reporters. “Investing in a college degree or career certificates should pay off, but too many students and families were ripped off. That’s unacceptable.”

Cardona thanked the attorneys general offices of Iowa, Massachusetts and Pennsylvania – which conducted investigations and brought lawsuits against the Art Institutes and EDMC – for providing evidence that cleared the way for the loan discharges.

Before it went out of business, EDMC was once one of the largest for-profit college chains in the country, with more than 150,000 students studying fields such as culinary arts, health sciences and education at 106 locations in 32 states and Canada. It owned the Art Institutes, Argosy University, South University and Brown Mackie College, but sinking enrollment led the company to sell off or close many campuses.

In 2017, the company struck a deal to sell Argosy, South and dozens of Art Institute campuses to Dream Center, a philanthropic foundation in Los Angeles with no education experience. In reviewing the acquisition, the Higher Learning Commission, an accrediting body, raised concerns about the quality of education at the campuses and withheld its seal of approval at several locations.

The new owners nevertheless advertised that the schools were fully accredited, which for-profit colleges must be to participate in federal student aid programs. Students kept enrolling, and the Trump administration kept giving them federal loans despite the schools’ ineligibility. After a number of controversies, including the disappearance of $16 million in federal financial aid for Argosy students, Dream Center closed or sold its schools and filed for bankruptcy.

In the aftermath, students and attorneys general filed lawsuits to get federal and private education loans disbursed during Dream Center’s tenure forgiven. They were largely successful, but students who predated that period were left out – until now.

“This is a big victory for students who attended Art Institute schools under EDMC’s ownership,” said Aaron Ament, president of the National Student Legal Defense Network, which is representing students in Dream Center’s receivership proceedings. “We need to hold wrongdoers accountable – otherwise executives will continue to exploit students for their own benefit.

“For five years, Student Defense has been in court fighting to hold the subsequent owners and executives of the Art Institute schools personally liable for their misdeeds, and we hope the government will join us in that effort.”

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