The Biden administration recently announced that more than 300,000 borrowers will be receiving $6.1 billion in student loan forgiveness as part of the latest group discharge for individuals who attended schools that engaged in widespread misrepresentations. This move is aimed at former students of the Art Institutes, a national chain of for-profit colleges that largely shut down last year. Borrowers will be eligible for automatic loan forgiveness and other forms of relief, including refunds of past payments. U.S. Secretary of Education Miguel Cardona stated that this initiative is part of the administration’s efforts to protect borrowers from predatory institutions and make higher education more affordable.
The Education Department accused the Art Institutes of making extensive misrepresentations to prospective students about postgraduation employment rates, salaries, and career services to entice them to enroll. This led to the approval of group discharges for borrowers who had attended Corinthian Colleges and ITT Technical Institutes in the past. The decision to approve this latest group discharge was based on findings by state attorneys general in Massachusetts, Iowa, and Pennsylvania. The department found that the Art Institutes engaged in widespread deceptive practices, including false advertising about employment prospects and inadequate career services.
To qualify for student loan forgiveness, borrowers must have enrolled at an Art Institute campus between January 1, 2004, and October 16, 2017. The relief will be provided through the Borrower Defense to Repayment program, which allows borrowers to request loan forgiveness based on school misconduct. Former Art Institute students will receive automatic Borrower Defense relief, and no application is needed for covered borrowers to receive student loan forgiveness. This approach is similar to group discharges approved for former students of other for-profit school chains.
In addition to student loan forgiveness, borrowers eligible for relief will also receive other forms of assistance. The department will take steps to pause payments on covered student loans to ensure borrowers do not face further financial demands during the discharge process. Covered borrowers may also receive refunds of past payments made, and credit trade lines will be deleted from their credit reports once the discharges are processed. While a timeline for when borrowers will receive the relief has not been provided, it could take some time based on past group discharge experiences.
The Biden administration’s efforts to make the Borrower Defense program more accessible to former students of predatory schools and hold institutions accountable for student debt relief have faced challenges. A federal appeals court recently maintained an injunction on new Borrower Defense regulations implemented last summer, suggesting they may be overturned. This could result in the program reverting to older rules implemented by the Trump administration, potentially leading to more borrowers being denied relief. Despite these obstacles, the administration is committed to providing assistance to borrowers affected by misconduct in the for-profit education sector.
