Biden-Harris Administration Approves $6.1 Billion Group Student Loan Discharge for 317,000 Borrowers Who Attended The Art Institutes

Biden-Harris Administration Approves $6.1 Billion Group Student Loan Discharge for 317,000 Borrowers Who Attended The Art Institutes

Today's action brings total approved debt cancellation under Biden Administration to almost $160 billion for nearly 4.6 million borrowers

May 1, 2024

Contact: Press Office, (202) 401-1576, [email protected]

The Biden-Harris Administration today announced the approval of more than $6.1 billion in automatic student loan relief to nearly 317,000 borrowers who enrolled at any Art Institute campus on or after Jan. 1, 2004, through Oct. 16, 2017. The U.S. Department of Education (Department) found that The Art Institutes and its parent company, Education Management Corporation (EDMC), made pervasive and substantial misrepresentations to prospective students about postgraduation employment rates, salaries, and career services during that time. In October 2017, EDMC sold its remaining Art Institute campuses, and all existing Art Institute campuses closed under separate ownership in September 2023. Today's action brings the total amount of student relief approved by the Biden-Harris Administration to almost $160 billion for nearly 4.6 million borrowers.

"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. "We must continue to protect borrowers from predatory institutions-and work toward a higher education system that is affordable to students and taxpayers."

The Department independently reviewed evidence provided by the attorneys general offices of Iowa, Massachusetts, and Pennsylvania, which conducted multi-year investigations into, and brought lawsuits against, The Art Institutes and EDMC. The attorneys general of Pennsylvania and Iowa provided materials obtained from investigations into these entities, including internal employment data, admissions training manuals, and the school's employment advertisements. The Massachusetts attorney general provided information obtained during an investigation into the New England Institute of Art-the Massachusetts Art Institute campus-including internal employment verification forms, other internal records of graduate employment outcomes, advertisements, and statements from former students and employees.

Today's announcement is another example of the strong partnerships between the Department and state attorneys general and their shared commitment to protecting federal student loan borrowers from predatory schools.

"The Art Institutes preyed on the hopes of students attempting to better their lives through education," said Federal Student Aid Chief Operating Officer Richard Cordray. "We cannot replace the time stolen from these students, but we can lift the burden of their debt. We remain committed to working with our federal and state partners to protect borrowers."

About the findings

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:

• The Art Institutes advertised that more than 80 percent of graduates obtained employment related their fields of study within six months of graduation, but the school's own records demonstrate that it inflated advertised employment rates. For example, The Art Institutes counted graduates as employed in-field when the school did not know graduates' job titles, when a graduate's job title was too vague to indicate that they worked in-field, and when a graduate's job title was unrelated to their field of study. The school also excluded some graduates with out-of-field jobs from their calculations to inflate their in-field employment rates. When recalculated to account for these issues, The Art Institutes' average in-field employment rate dropped from 82 percent to no higher than 57 percent, 25 percentage points lower than advertised. The true average in-field employment rate was lower than 57 percent because the school also falsified some internal data to make graduates appear to be working in-field when they were not.

• The advertisements promoting The Art Institutes' falsified employment rates also displayed inaccurate average salaries that graduates earned from their in-field positions based on the same flawed data as the employment rates. Testimony from former high-raking school officials supported the findings that school personnel made up graduate earnings and annualized the actual or estimated incomes of graduates working in temporary positions. They also included high-earning outliers in its averages and falsified incomes reported for graduates. For example, according to a former employee, one Art Institute campus included professional tennis player Serena Williams' annual income to "skew the statistics and overinflate potential program salaries." Another former employee described witnessing a coworker use salary.com to determine that a graduate's salary was $25,000, when the graduate reported earning only $8,000 a year.

• The Art Institutes also represented to prospective students that it had partnerships with employers and offered ongoing postgraduation career services. However, the evidence showed that The Art Institutes exaggerated its relationships with employers. In fact, the school had a negative reputation, so companies generally did not want to hire its graduates. Former employees and borrowers also described that graduates did not have access to ongoing career services after leaving school. For example, once students graduated, school staff did not return their phone calls.

The Art Institutes communicated these substantial misrepresentations to prospective students through its website and print materials, and school personnel distributed misleading information to prospective students before and during the admissions process. The school's misconduct harmed borrowers by burdening them with high amounts of debt without the advertised employment opportunities or salaries necessary to pay. Many Art Institute borrowers also dropped out of their programs and defaulted on their loan payments. Even if borrowers did complete their programs, they did not receive the promised career services, which hindered their ability to obtain employment.

Next steps

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. The Department will begin notifying eligible borrowers today that they are approved for discharges. Borrowers do not need to take any action. The Department will take immediate steps to pause loans identified for discharge so borrowers do not make further payments. This ensures that they will not face any further financial demands from these loans during the time needed to process their discharges. When their discharges are processed, borrowers will see any remaining loan balances adjusted and credit trade lines deleted. Payments borrowers made to the Department on their related federal student loans will also be refunded.

Borrowers who want to learn more about borrower defense can do so at StudentAid.gov/borrower-defense.

Unwavering commitment to relief

The Biden-Harris Administration remains committed to using all available tools to deliver the federal student loan relief that borrowers and their families deserve. In total, the Administration has approved almost $160 billion in relief for nearly 4.6 million borrowers, including:

• $49.2 billion for more than 996,000 borrowers through improvements to IDR that addressed longstanding administrative failure and the misuse of forbearance by loan servicers.
• $62.8 billion in forgiveness for almost 876,000 borrowers through fixes to PSLF.
• $4.8 billion for almost 360,000 borrowers on the SAVE Plan. These are borrowers who originally took out smaller loans for their postsecondary studies.
• $28.7 billion for 1.6 million borrowers who were cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements.
• $14.1 billion for more 548,000 borrowers with a total and permanent disability.

• Tags: Federal Student LoansBorrower DefensePress Releases