The Biden administration announced on Wednesday that it would cancel $6 billion in student loans for individuals who attended the Art Institutes, a group of for-profit colleges that closed all of its campuses in 2023 due to allegations of fraud. The Education Department cited the chain’s use of deceptive practices, including providing false information about job placement rates and salaries of graduates, as the basis for canceling the loans. This decision will affect 317,000 borrowers who attended any Art Institute campus between 2004 and 2017.
The Education Department’s investigation found that the Art Institutes misled students by falsely claiming that over 80% of graduates found jobs in their fields of study, when the actual employment rate was below 57%. Campuses also manipulated salary data, including including outlier data like tennis star Serena Williams’ salary, to inflate average salaries. These misleading tactics led students to take on high amounts of debt for programs that did not result in promising career outcomes. The Education Department aims to alleviate the financial burden of these borrowers by canceling their loans.
Richard Cordray, chief operating officer of the Education Department’s Federal Student Aid office, condemned the Art Institutes for preying on students’ aspirations for a better future through education. He acknowledged that while the government could not undo the harm caused to these students, canceling their loans would help alleviate their debt burden. Borrowers affected by this announcement will receive notifications by email, and any payments already made towards the loans will be refunded. The Art Institutes, once a nationwide chain with campuses in major cities such as New York and Los Angeles, closed its doors in 2023 after facing legal challenges and financial troubles.
The Art Institutes were operated by Education Management Corp., which faced legal issues and ultimately collapsed in 2018. Following a settlement with the Justice Department over recruiting violations, the company began closing campuses and eventually sold the remaining assets. The Biden administration has been actively canceling student loans through various programs, including those for public workers and individuals defrauded by their schools. In total, the administration has approved the cancellation of nearly $160 billion in student loans, as it continues to pursue a broader plan for one-time loan forgiveness.
Overall, the decision to cancel $6 billion in student loans for Art Institute attendees is part of the Biden administration’s efforts to address fraud and misconduct in the for-profit college industry. By holding institutions accountable for deceptive practices and providing relief to affected borrowers, the Education Department aims to protect students from being exploited in pursuit of higher education. The administration’s ongoing commitment to canceling student loans reflects its dedication to helping individuals overcome financial challenges and achieve their educational goals.
