Biden Administration Forgives $6 Billion in Student Debt for 317,000 Borrowers Defrauded by Art Institutes

The Biden administration has announced the forgiveness of $6 billion in student debt for 317,000 borrowers who attended the Art Institutes, a system of for-profit colleges that closed in 2023 amid accusations of fraud. The Education Department found that the chain misled students about the success of graduates and employment partnerships, with fabricated data on employment rates and graduate salaries.

The administration is invoking its power to cancel student loans for borrowers who were misled by the colleges. This brings the total student loan forgiveness under the Biden administration to $160 billion for 4.6 million individuals. The administration directly criticized the previous administration for "looking the other way" when colleges defrauded students and borrowers.

The Art Institutes were described as "predatory" institutions that "falsified data, knowingly misled students, and cheated borrowers into taking on mountains of debt." The Education Department worked with the attorneys general offices of Iowa, Massachusetts, and Pennsylvania, who conducted multi-year investigations into The Art Institutes and its parent company, Education Management Corporation (EDMC).

The investigations found that the Art Institutes engaged in widespread misrepresentations and deception about the value and outcomes of their education. EDMC filed for bankruptcy in 2018, and the remaining Art Institute campuses were sold in 2017 and closed under separate ownership in 2023.

Why this matters: This debt relief is part of the Biden administration's broader efforts to provide targeted relief for borrowers defrauded by for-profit colleges. The administration has now canceled a total of almost $160 billion in student loan debt for nearly 4.6 million borrowers, which is 10% of all outstanding federal student loan debt.

Eligible borrowers who were enrolled at the Art Institutes between January 2004 and October 2017 will start being notified on Wednesday and will receive the forgiveness automatically, without having to go through the formal process for loan relief for defrauded borrowers. "The Art Institutes engaged in widespread and pervasive misrepresentations that deceived students about the value they would receive from their education," said Education Secretary Miguel Cardona.

Key Takeaways

• Biden admin forgives $6.1B in student debt for 317K Art Institutes borrowers.
• Art Institutes misled students about graduate employment and earnings data.
• Total student loan forgiveness under Biden reaches $160B for 4.6M borrowers.
• Eligible Art Institutes borrowers will receive automatic debt relief.
• Debt relief part of Biden's efforts to aid borrowers defrauded by for-profit colleges.