WASHINGTON – The Biden administration said Wednesday it will cancel $6 billion in student loans for people who attended the Art Institutes, a for-profit college system that closed the last of its campuses in 2023 amid allegations of fraud.
Claiming that the network lured students with “pervasive” lies, the Department of Education is invoking its power to cancel student loans for borrowers who were misled by their colleges.
“This institution falsified data, knowingly misled students, and tricked borrowers into taking on mountains of debt without leading to promising career prospects at the end of their studies,” President Joe Biden said in a statement.
The Department of Education will automatically cancel loans for 317,000 people who attended any Art Institute campus between January 1, 2004 and October 16, 2017.
The department says it is taking action after reviewing evidence from the attorneys general of Massachusetts, Iowa and Pennsylvania, who previously investigated fraud complaints and prosecuted the for-profit chain.
According to the department’s findings, the network misled students about graduates’ success and about employment partnerships that would help students find jobs.
The network told prospective students that more than 80% of graduates found jobs in their fields of study, but this was largely based on doctored data, the Department of Education said. The true employment rate was less than 57%.
Campuses also advertised graduate salaries based on fabricated data and included extreme values to make averages look better, the department said.
One campus included tennis star Serena Williams’ annual salary to distort the average salary, investigators found. Williams studied fashion at the Art Institute of Fort Lauderdale, Florida.
The chain’s tactics led borrowers to lend large amounts for programs that didn’t pay off, the department said.
“Art Institutes preyed on the hopes of students trying to improve their lives through education,” said Richard Cordray, director of operations for the Department of Education’s Office of Federal Student Aid. “We cannot replace the time stolen from these students, but we can ease the burden of their debt.”
On Wednesday, the Department of Education will begin sending emails to borrowers informing them that their loans will be canceled. They will not need to take any action and payments already made on the loans will be refunded.
At its peak, the network had dozens of campuses across the country, including in New York, Chicago, Miami and Los Angeles. It was operated for decades by Education Management Corp., which went bankrupt in 2018 after years of legal troubles.
The company reached a $95.5 million settlement with the Department of Justice in 2015 over allegations of illegal recruiting tactics. Soon after, it began closing campuses and later sold the remainder to another company.
The last eight campuses closed last year.
The Biden administration has continued to cancel student loans through several existing programs while also pursuing a broader plan for one-time cancellation. This plan is a continuation of the one the Supreme Court rejected last year.
In total, the Democratic administration claims to have approved the cancellation of almost $160 billion in student loans, notably through programs for public employees and people defrauded by their schools.
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