The Biden administration has announced the forgiveness of over $6.1 billion in student debt for 317,000 former students of The Art Institutes, a once popular chain of for-profit schools. The relief will benefit borrowers who attended any of the Art Institute campuses between January 1, 2004 and October 16, 2017. The U.S. Department of Education reviewed evidence provided by Iowa, Massachusetts, and Pennsylvania attorneys general and found that the schools and its parent company, Education Management Corporation (EDMC), had made misleading representations about post-graduation employment rates, salaries, and career services to prospective students. Secretary of Education Miguel Cardona stated that students had borrowed billions of dollars to attend The Art Institutes and received little but lies in return.
The Education Department found that The Art Institutes falsified average salaries among graduates, among other abusive practices. For example, one campus included professional tennis player Serena Williams’ annual income in order to inflate potential program salaries. Eligible borrowers will receive automatic forgiveness, regardless of whether they had previously applied for loan relief as defrauded borrowers. EDMC sold its Art Institute campuses in October 2017, with all schools closing under new ownership by September 2023. The company filed for bankruptcy in 2018, with Goldman Sachs having previously owned a significant portion of EDMC.
Goldman Sachs responded to the news by stating that it had exited its investment in EDMC over a decade ago. The Department of Education’s decision to forgive the student debt of former Art Institute students is part of ongoing efforts to protect borrowers from predatory practices and work towards a more affordable higher education system for students and taxpayers. Despite the relief provided to these former students, the broader issue of student debt and predatory for-profit schools remains a significant concern within the education system. The Biden administration and the Department of Education will likely continue to address these issues and work to prevent similar abuses from occurring in the future.
This announcement comes as a significant step towards rectifying the harms caused by for-profit schools and providing much-needed relief to affected borrowers. The decision to forgive student debt for Art Institute students reflects a commitment to holding institutions accountable for deceptive practices and ensuring that students are not burdened with debt as a result of misleading information. Moving forward, it will be important for policymakers, regulatory agencies, and the education sector to continue monitoring and addressing issues related to student debt, predatory schools, and consumer protections to prevent similar injustices from occurring in the future.
