The Biden administration announced that more than 300,000 borrowers will receive $6.1 billion in student loan forgiveness following the latest group discharge for borrowers who attended schools that allegedly engaged in widespread misrepresentations.
The group discharge is geared toward 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 relief, including refunds of past payments.
“For more than a decade, hundreds of thousands of hopeful students borrowed billions to attend The Art Institutes and got little but lies in return. That ends today—thanks to the Biden-Harris Administration’s work with the attorneys general offices of Iowa, Massachusetts, and Pennsylvania,” said U.S. Secretary of Education Miguel Cardona in a statement on Wednesday. “We must continue to protect borrowers from predatory institutions—and work toward a higher education system that is affordable to students and taxpayers.”
Who Qualifies For Group Student Loan Forgiveness
The Education Department accused the Art Institutes of making “pervasive and substantial misrepresentations to prospective students about postgraduation employment rates, salaries, and career services” in order to convince prospective students to enroll. The Art Institute’s parent company, Education Management Corporation (EDMC), sold the remaining Art Institute campuses in 2017, and those campuses eventually shut down last year under separate ownership.
The Biden administration previously approved group discharges for borrowers who had attended Corinthian Colleges and ITT Technical Institutes, two other national chains of for-profit schools that closed following allegations of widespread misconduct. The Biden administration relied on findings made by state attorneys general — notably in Massachusetts, Iowa, and Pennsylvania — in reaching the determination to approve this latest group discharge.
“Based on the evidence, the Department found that The Art Institutes engaged in widespread and pervasive substantial misrepresentations that deceived students about the value they would be receiving from their education,” said the department in a statement. This included false advertising about employment prospects and the schools’ relationships with prospective employers, as well as inadequate career services.
More than 300,000 borrowers will receive student loan forgiveness following the group discharge announcement. To qualify, borrowers must have enrolled at an Art Institute campus between January 1, 2004 and October 16, 2017.
Borrowers Eligible For Automatic Student Loan Forgiveness — No Application Needed
The Biden administration approved relief through Borrower Defense to Repayment, a federal debt relief program that allows borrowers to request student loan forgiveness on the basis of certain forms of school misconduct.
Normally, borrowers must submit long, detailed applications supported by corroborating evidence if they want to apply for Borrower Defense relief. The Education Department would then conduct an individualized review and render a determination. But the process can sometimes take years.
For former Art Institute students, Borrower Defense relief will be automatic. No application is needed for borrowers covered by the group announcement to receive student loan forgiveness. This is similar to the group discharges that were approved for former students of Corinthian Colleges and and ITT Technical Institutes.
“This group discharge will provide relief automatically to borrowers harmed by The Art Institutes’ actions, including borrowers who have not yet applied for borrower defense,” said the department in its announcement on Wednesday. “The Department will begin notifying eligible borrowers today that they are approved for discharges. Borrowers do not need to take any action.”
Borrowers Eligible For Student Loan Forgiveness Will Receive Other Relief
In addition to student loan forgiveness, the department indicated that officials will take steps to pause payments on covered student loans to ensure that borrowers “will not face any further financial demands from these loans during the time needed to process their discharges.”
Borrowers eligible for loan forgiveness may also receive refunds of past payments made. The department will also see that credit trade lines are deleted on borrowers’ credit reports once the discharges are processed, according to the announcement.
The Education Department has not provided a timeline for when covered borrowers will actually receive the Borrower Defense relief. But it could take awhile. Many borrowers waited months to receive student loan forgiveness under the Corinthian and ITT group discharges. And thousands of borrowers covered by the recent Sweet v. Cardona settlement — another group discharge related to the Borrower Defense program — are still waiting for loan forgiveness more than a year after the settlement was approved.
Meanwhile, the Biden administration’s attempts to make the Borrower Defense program more accessible to former students of predatory schools, and to hold schools accountable for the associated student debt relief, hit a snag last month. A federal appeals court maintained an injunction on new Borrower Defense regulations that were implemented last summer, and suggested that those new rules will likely be overturned. If that happens, the program would revert to an older set of Borrower Defense rules implemented by the Trump administration, which could ultimately result in more borrowers getting denied relief.
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