The Biden administration announced on Wednesday that it will forgive $6 billion in student loans for individuals who attended the Art Institutes, a chain of for-profit colleges that closed all its campuses in 2023 amidst allegations of fraud.
The Education Department, citing pervasive deception by the institution, will use its authority to cancel loans for borrowers who were misled by the colleges.
President Joe Biden stated, “This institution falsified data, knowingly misled students, and cheated borrowers into accumulating substantial debt without leading to promising career prospects after graduation.”
Loans will be automatically forgiven for 317,000 people who attended any Art Institute campus between January 1, 2004, and October 16, 2017.
This action follows a review of evidence from the attorneys general of Massachusetts, Iowa, and Pennsylvania, who previously investigated fraud complaints and sued the for-profit chain.
The Department found that the chain misled students about the success of graduates and employment partnerships meant to assist students in finding jobs.
The chain claimed that over 80% of graduates secured jobs in their fields, but this figure was largely based on manipulated data. The actual employment rate was below 57%.
Campuses also advertised graduate salaries using fabricated data, including extreme outliers to inflate averages. For instance, one campus included tennis star Serena Williams’ salary to boost the average, as she studied fashion at the Art Institute of Fort Lauderdale, Florida.
These deceptive practices led borrowers to take on substantial debt for programs that failed to deliver on promised outcomes.
Richard Cordray, Chief Operating Officer of the Education Department’s Federal Student Aid office, remarked, “The Art Institutes exploited the aspirations of students seeking to improve their lives through education. While we cannot restore the time lost by these students, we can alleviate the burden of their debt.”
Affected borrowers will receive notification emails from the Education Department, informing them of the loan cancellation. No action is required from borrowers, and any payments already made on the loans will be refunded.
At its peak, the chain had numerous campuses nationwide, including in New York, Chicago, Miami, and Los Angeles. It was operated by Education Management Corp. for decades until its collapse in 2018 due to legal issues.
The Biden administration has continued to forgive student loans through various existing programs while also considering broader one-time forgiveness plans, following a Supreme Court rejection of a similar proposal last year.
Overall, the administration claims to have forgiven nearly $160 billion in student loans, including those for public workers and individuals defrauded by their schools.
