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The Biden-Harris Administration announced automatic debt relief of more than $6.1 billion for nearly 317,000 former Art Institute students. This decision came after the school and its parent company, Education Management Corporation (EDMC), were found to have engaged in fraudulent practices regarding employment prospects and post-graduation earnings.
From January 2004 to October 2017, the Art Institutes reportedly inflated employment rates and salaries, misleading students about the true value of their educational investments. This misinformation led students to incur significant debt under false pretenses, which placed financial and professional strain on them.
These student loans were forgiven through a program called Borrower Defense To Repaid. This is part of a broader effort to crack down on for-profit colleges.
Borrower defense issues
U.S. Secretary of Education Miguel Cardona emphasized that the move is aimed at correcting over a decade of fraud that has cost students billions of dollars. “For more than a decade, hundreds of thousands of hopeful students borrowed billions to attend the Art Institutes and got little in return except lies. “That ends today, thanks to the Biden-Harris administration’s cooperation with the attorneys general of Iowa, Massachusetts, and Pennsylvania,” he said.
The approval of the debt relief was supported by evidence from lengthy investigations by state attorneys general, including internal documents and witness statements that revealed the extent of the misrepresentations. This research found that art institutions had reported an 82% employment rate for their students within six months of graduation, a figure that dropped dramatically to just 57% when correctly recalculated. Additionally, salary data was also found to be inflated, including extreme measures such as reporting the earnings of high-income outliers such as professional athletes to distort average income statistics.
This forgiveness includes the cancellation of federal student loan balances for affected borrowers and the refund of payments already made. Federal Student Aid Chief Operating Officer Richard Cordray noted, “We cannot replace the time stolen from these students, but we can reduce their debt burden. We remain committed to working with our federal and state partners to protect borrowers.”
Biden Administration Lending Efforts
As part of its broader efforts, the Biden administration has now forgiven nearly $160 billion in student loans for about 4.6 million borrowers. This total includes corrections for administrative deficiencies, improvements in loan processing practices, and forgiveness for borrowers who were misled by their institutions or whose schools suddenly closed.
The Department of Education will immediately notify eligible borrowers and has assured that affected individuals will not need to take any action to benefit from this relief. This initiative reflects the administration's unwavering commitment to repairing the financial harm caused by predatory education practices and ensuring a more equitable higher education landscape.
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