The Biden administration announced May 1 plans to cancel $6.1 billion in student loans for more than 317,000 borrowers who attended any of the for-profit The Art Institutes colleges.

The backstory

The news comes a little over seven months after officials with The Art Institutes announced the permanent closure of all schools, including a Houston-area school on the Southwest Freeway.

The news, delivered by an email sent out to all students, caught many students off guard. The most recent data available from the National Center of Education Statistics for fall 2022 showed a total enrollment of 317 students at the Art Institute of Houston.

School officials cited challenges spurred by the COVID-19 pandemic among the reasons for the closure.

The details

The automatic loan forgiveness will be applied to 317,000 borrowers who enrolled at any Art Institute campus on or after Jan. 1, 2004, through Oct. 16, 2017, according to a May 1 news release. It follows a finding by the U.S. Department of Education that The Art Institutes and parent company Education Management Corporation "made pervasive and substantial misrepresentations to prospective students about postgraduation employment rates, salaries and career services during that time."

What they're saying

“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,” U.S. Secretary of Education Miguel Cardona said in a statement. “We must continue to protect borrowers from predatory institutions—and work toward a higher education system that is affordable to students and taxpayers.”

Zooming in

The Department of Education findings were informed by a multiyear investigation into the institutes conducted by attorneys general in several states where branches operated, including Iowa, Massachusetts and Pennsylvania. Key findings from the investigation and connected lawsuits included:
  • Advertisements from The Art Institutes suggesting 80% of graduates obtained employment in areas related to their fields of study within six months of graduation, a figure shown to be inflated by the schools' own data. When recalculated, the rate dropped to "no higher than 57%."
  • Advertisements displaying inaccurate average salaries that graduates earned from in-field positions, with some school personnel annualizing estimated incomes of graduates working in temporary positions. According to the release, one Art Institute campus included the annual income of professional tennis player Serena Williams, who graduated from the Art Institute of Fort Lauderdale.
  • Institute officials exaggerating relationships with employers to prospective students
What's next

Relief will be provided automatically to borrowers enrolled during the specified time frame, including borrowers who have not yet applied for borrower defense. Borrowers do not need to take any action and do not need to make further payements, according to the release, and the Department of Education will take immediate steps to pause loans while discharges are processed. Payments already made on loans will be refunded.