$6 billion in Art Institute student loans approved for cancellation: 5 things to know

The Biden administration announced that it is canceling $6 billion in student loans for students who attended the Art Institutes, a system of now-closed for-profit colleges that were the center of fraud allegations. Philadelphia’s campus closed in 2018.

“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.

It’s a move that follows the Biden administration’s continued efforts to cancel student loans through existing programs following the Supreme Court’s rejection to its sweeping student debt cancellation last year.

In total, the Biden administration says it has approved the cancellation of almost $160 billion in student loans, including through programs for public workers and those defrauded by their schools.

Here’s what you need to know.

The Department of Education 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 college chain.

According to the investigation’s findings, the Art Institutes misled students about the success rates and salaries of graduates as well as the amount of school partnerships available to help students find jobs.

The chain said more than 80% of its graduates found jobs in their fields of study. In reality, the education department said, the data were doctored and the rate was below 57%.

Campuses also advertised graduate salaries based on inflated data, the investigation revealed. The Art Institute of Fort Lauderdale, Fla., for instance, included the annual salary of former professional tennis player Serena Williams — who studied fashion at the school — to skew its data.

The department said these tactics led students to borrow high amounts of debt for programs that didn’t pay off.

Art Institutes once had dozens of campuses across the country, with locations in New York, Los Angeles, and Philadelphia, where it operated at 1622 Chestnut St. It was operated for decades by Education Management Corp., which collapsed in 2018 after years of legal trouble.

Following allegations of the chain’s illegal recruiting tactics, the company reached a $95.5 million settlement with the Justice Department in 2015 and began closing campuses. Philly’s campus closed in 2018, eliminating nearly 200 jobs.

» READ MORE: Art Institute of Philadelphia closing; 171 jobs eliminated

The chain’s remaining eight campuses closed last year.

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.

No. The Department of Education said it would begin e-mailing eligible borrowers on May 1. They won’t need to take any action, and payments already made on loans will be refunded.

Richard Cordray, chief operating officer of the Education Department’s Federal Student Aid office, said the student loan relief was long overdue.

“The Art Institutes preyed on the hopes of students attempting to better their lives through education. We cannot replace the time stolen from these students, but we can lift the burden of their debt.”

U.S. Secretary of Education Miguel Cardona said the ultimate goal is to make higher education affordable to students and taxpayers.

“We must continue to protect borrowers from predatory institutions,” he said.

This article contains information from the Associated Press.