Former students of the for-profit Art Institutes are approved for $6 billion in loan cancellation

The Biden administration says it'll cancel $6 billion in student loans for people who attended the Art Institutes, a system of for-profit colleges that closed the last of its campuses in 2023 amid accusations of fraud

Credit: AP

Credit: AP

WASHINGTON (AP) — The Biden administration on Wednesday said it will cancel $6 billion in student loans for people who attended the Art Institutes, a system of for-profit colleges that closed the last of its campuses in 2023 amid accusations of fraud.

Saying the chain lured students with "pervasive" lies, the Education Department is invoking its power to cancel student loans for borrowers who were misled by their colleges.

“This institution falsified data, knowingly misled students, and cheated 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 Education Department will automatically erase loans for 317,000 people who attended any Art Institute campus between Jan. 1, 2004, and Oct. 16, 2017.

In total, the Democratic administration says it has approved the cancellation of almost $160 billion in student loans through a variety of existing programs. Among that total, $28.7 billion has been canceled for those who were cheated by their colleges or went to campuses that suddenly closed.

The department says it's taking action after reviewing evidence from the attorneys general of Massachusetts, Iowa and Pennsylvania, which previously investigated complaints of fraud and sued the for-profit chain.

According to the department's findings, the chain misled students about the success of graduates and about employment partnerships that would help students find jobs.

The chain told prospective students that more than 80% of graduates found jobs in their fields of study, but that was largely based on doctored data, the Education Department said. The true employment rate was below 57%.

Campuses also advertised graduate salaries that were based on fabricated data and included extreme outliers to make averages look better, the department said.

One campus included the annual salary of tennis star Serena Williams to skew the average salary, investigators found. Williams studied fashion at the Art Institute of Fort Lauderdale, Florida.

The chain's tactics led borrowers to borrow high amounts of debt for programs that didn't pay off, the department said.

“The Art Institutes preyed on the hopes of students attempting to better their lives through education,” said Richard Cordray, chief operating officer of the Education Department's Federal Student Aid office. “We cannot replace the time stolen from these students, but we can lift the burden of their debt."

On Wednesday, the Education Department will start emailing borrowers who will get their loans canceled. They won't need to take any action, and payments already made on the loans will be refunded.

At its height, the chain 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 collapsed in 2018 after years of legal trouble.

The company reached a $95.5 million settlement with the Justice Department in 2015 over allegations of illegal recruiting tactics. Soon after, it began closing campuses and later sold the remainder to another company.

The final eight campuses were shuttered last year.

The Biden administration has continued to cancel student loans through several existing programs even as it pursues a wider plan for one-time cancellation. That plan is a follow-up to one that the Supreme Court rejected last year.

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