Education Department Announces Continued Progress with Borrower Defense and Closed School Loan Discharges
The U.S. Department of Education (ED) announced recently plans to grant borrower defense relief for federal student loan borrowers who attended the now-defunct American Career Institute (ACI) in Massachusetts. This move follows the Department’s investigation as well as numerous admissions by the school that it made false and misleading representations to students, misstated job placement rates and employed instructors who were unauthorized to teach under applicable state laws. ED also announced substantial progress with processing borrower defense claims from former Corinthian Colleges Inc. (CCI) students, and that approvals are beginning for borrower defense claims from former ITT Technical Institutes (ITT) students. Additionally, ED announced that a significant number of closed school loan discharges have been approved, particularly for students impacted by the recent closure of ITT.
“With the help of state attorneys general, we’ve cracked down on bad actors that leave students with debt but meaningless credentials. We are especially grateful to Attorney General Healey and her team for investigating and uncovering ACI’s deceptive practices.” said U.S. Under Secretary of Education Ted Mitchell. “We’ve taken important steps to provide borrowers the relief they deserve. This is real progress. And more work remains to ensure that relief continues for borrowers who are deceived by institutions that engage in fraud.”
Beginning Jan. 17, borrowers who used federal loans to attend ACI programs in Massachusetts will begin receiving emails from Federal Student Aid informing them that any existing federal loans incurred as a result of enrolling at ACI will be automatically discharged. Of the roughly 4,500 students who attended ACI, 650 have already received closed school loan discharges. The remaining students will receive automatic borrower defense discharges.
“ACI was a predatory, for-profit school that admitted to breaking Massachusetts law and lying to its students. Today, these students are finally getting the relief they deserve,” Attorney General Maura Healey said. “I thank Secretary King and the Department for utilizing its authority to grant immediate group relief to our students, and the dedicated lawyers and investigators in my office for building the case against ACI. Our office will continue to help students struggling with unaffordable debt and hold predatory schools accountable for their illegal conduct.”
ACI enrolled roughly 4,500 students at five campuses in Massachusetts between 2010 and 2013. The school became the subject of a complaint filed by the Massachusetts Attorney General’s Office (MA AGO) in Nov. 2013 alleging the school engaged in “a range of deceptive schemes.” By June 2016, the MA AGO and ACI entered into a consent judgment which included numerous admissions that ACI made a series of false representations to prospective students and engaged in misconduct that is actionable under the Massachusetts Consumer Protection Act. These representations include purposefully misstating job placement rates for fifteen cohorts of students who enrolled between June 2011 and Dec. 2012 to maintain institutional accreditation.
The combined loan discharges and refunds of amounts already paid by ACI borrowers announced today will total roughly $30 million.
Continued Progress with Borrower Defense and Closed School Discharge Relief
The Department is making continued progress with adjudicating borrower defense claims and processing closed school loan discharges for impacted borrowers. The Department has approved more than 12,000 additional claims from borrowers deceived by CCI’s falsified job placement rates since the most recent borrower defense claims report released in Oct. 2016. Additionally, the Department has approved two additional types of borrower defense claims: those involving misrepresentations about the transferability of credits as the basis for debt relief, and those involving CCI’s false guarantees of employment for graduates. To date, more than 28,000 total CCI claims have been approved, representing approximately $558 million in loan relief.