At least 1,500 former students from two closed for-profit schools will have their student loan debt forgiven following an investigation from the Congressional committee, as well as a class-action lawsuit.
The schools involved are the Art Institute of Colorado and the Illinois Institute of Art. These two schools followed several other for-profit college chains involved in similar scandals. The fallout began with Corinthian Colleges filing for bankruptcy in 2015 and ITT Educational Services closing one year later. Another for-profit institution, the Education Corporation of America closed in late 2018, leaving students who were attending the institutions with nowhere to go and thousands of dollars in student loan debt.
According to the lawsuit involving the Art Institute of Colorado and Illinois Institute of Art, an outside accrediting organization revoked both schools’ accreditation statuses in January 2018. Despite this fact, neither school reported this to their students. Both schools ended enrollment in July 2018, leaving many students with no degree and thousands of dollars in debt. Their parent company, Dream Center, then went into a form of bankruptcy known as receivership. Following this development, Congressman Bobby Scott, a Democrat from Virginia, requested the House Committee on Education and Labor look into the matter.
The major concern brought by Congressman Scott had to do with the fact that once accreditation was revoked, students attending that institution could no longer receive federal aid legally. Despite this fact, both schools continued to issue over $11 million in student loans between January 2018 and May 2018.
As a result, students of these schools sued the Department of Education, claiming that they should receive a discharge of any student loan debt incurred after accreditation was revoked.
Education Secretary, Betsy DeVos, blamed the third-party accrediting agency for how it handled the accreditation of both schools, stating that the decision to forgive this debt was made as an effort by the Department to hold institutions and accreditors accountable.
The total amount of debt that will be cancelled is worth $10.8 million. On top of the approximately 1,500 students receiving loan forgiveness, an additional 285 borrowers could qualify for a discharge, which would bring the total amount of loans forgiven to $16.1 million.
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