U.S. Department of Education Forgives $6.1 Billion in Student Debt for Former Art Institutes Students

The U.S. Department of Education has announced the forgiveness of over $6.1 billion in student debt for 317,000 former students of The Art Institutes, a now-defunct for-profit college chain. The loan cancellation comes as a result of the Department's findings that The Art Institutes and its parent company, Education Management Corporation (EDMC), made "pervasive and substantial misrepresentations" to prospective students about post-graduation employment rates, salaries, and career services between 2004 and 2017.

Investigations conducted by the state attorneys general of Iowa, Massachusetts, and Pennsylvania revealed that The Art Institutes inflated graduate employment rates, salaries, and partnerships with employers, leading students to take out loans they could not pay back. The Department found that the schools falsified average graduate salaries, including by incorporating the income of professional tennis player Serena Williams to inflate the statistics.

Why this matters: This decision holds the school accountable for its deceptive practices and provides relief to borrowers who were misled. It also highlights the ongoing efforts by the Biden administration to address the student debt crisis and protect students from fraudulent practices by for-profit schools.

Eligible borrowers will receive the debt relief automatically, without having to go through a formal process. The forgiveness is being provided under the Borrower Defense program, which allows those defrauded by their schools to seek loan cancellation. The remaining Art Institute campuses were sold in 2017, and all schools closed under separate ownership in 2023, while EDMC filed for bankruptcy in 2018.

U.S. Secretary of Education Miguel Cardona stated, "Today's announcement will provide more than 300,000 borrowers with $6.1 billion in debt relief, holding The Art Institutes accountable for their deceptive practices and providing these borrowers with the relief they deserve."

This latest round of forgiveness brings the total amount of relief given to student loan borrowers under the Biden administration to $160 billion for 4.6 million individuals, which is 10% of all outstanding federal student loan debt. The announcement is one of the biggest group discharges made under the borrower defense program and follows investigations by several state attorney general offices.

Key Takeaways

• $6.1B in student debt forgiven for 317,000 Art Institutes borrowers
• Forgiveness due to school's deceptive claims about employment, salaries
• Eligible borrowers to receive relief automatically under Borrower Defense
• Brings total Biden admin. student debt relief to $160B for 4.6M borrowers
• Largest group discharge under Borrower Defense program to date