Student-loan borrowers who enrolled at any Art Institute campus from January 1, 2004, to October 16, 2017, will receive automatic debt cancellation.
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Student-loan borrowers who attended a for-profit chain accused of fraud are getting debt cancellation.
On Wednesday, President Joe Biden's Education Department announced that 317,000 borrowers who attended any Art Institute campus between January 1, 2004, to October 16, 2017, will receive $6.1 billion in debt relief.
The Art Institutes were a for-profit system that prompted investigations from the attorneys general of Iowa, Massachusetts, and Pennsylvania. Using internal data from the schools, the investigations found that the Art Institutes "engaged in widespread and pervasive substantial misrepresentations that deceived students about the value they would be receiving from their education," according to the department's press release.
While all remaining Art Institute campuses closed in September 2023, some of its former students are still making payments on the debt. Wednesday's announcement changes that.
"The Art Institutes preyed on the hopes of students attempting to better their lives through education," Federal Student Aid Chief Operating Officer Richard Cordray said in a statement. "We cannot replace the time stolen from these students, but we can lift the burden of their debt. We remain committed to working with our federal and state partners to protect borrowers."
According to the department, this group discharge will automatically provide relief to impacted borrowers — including those who had not submitted an individual borrower defense to repayment application, a form borrowers can fill out to request relief if they believe they were defrauded by the school they attended.
The department will begin notifying borrowers of the relief on Wednesday. It will also ensure that impacted loans are put on pause so borrowers do not have to make any payments while the relief is carried out.
"This ensures that they will not face any further financial demands from these loans during the time needed to process their discharges," the department said. "When their discharges are processed, borrowers will see any remaining loan balances adjusted and credit trade lines deleted."
The investigations from the attorneys general found that the Art Institutes advertised that over 80% of graduates landed jobs within six months of graduation when that was not the case. The schools also had inaccurate average salaries — for example, according to the investigations, a former employee said a coworker used salary.com to report a graduate's salary as $25,000 despite the graduate reporting an $8,000 a year income.
Since Biden took office, the Education Department has enacted a range of targeted relief for defrauded borrowers. In June 2022, the department announced $5.8 billion in debt relief for 560,000 borrowers who attended now-defunct for-profit Corinthian College, the largest group charge the department had acted on to date.
In addition, the department has been carrying out relief through one-time account adjustments for borrowers on income-driven repayment plans and Public Service Loan Forgiveness, allowing payments that may not have previously been counted toward forgiveness to be accounted for.
More broadly, the Education Department is working to implement its broader student-loan forgiveness plan after the Supreme Court struck down its first attempt. The new plan, expected to benefit over 30 million borrowers, is in its public comment period, and the department plans to move toward final implementation as early as this fall.
