Feds Will Forgive $30M In Federal Loans For Students Of Defunct American Career Institute

Image courtesy of (Sapurah Lashari)

Under the “Borrower Defense” program, a student’s federal education loans can be forgiven if they can prove their college used deceptive practices to convince them to enroll. The Department of Education confirmed today that this program will be used to forgive $30 million in federal student loans for thousands of former students from the defunct American Career Institute.

The Dept. of Education announced this morning that its investigation into the admissions practices at Massachusetts-based ACI had concluded that 4,500 students qualified for this relief.

According to the Dept., ACI admitted 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. As a result, the Dept. determined there was sufficient evidence to conclude students who attended the schools enrolled under deceptive means.

In all, the Dept. says that 3,850 students will have their loans discharged through borrower defense. Another 650 students have already received “closed school” loan discharges.

A closed school loan discharge differs from a borrower defense discharge in that it is available to currently or recently enrolled students when a school shuts its doors. Borrower Defense applies to students who did not recently attend the school, but who still fell prey to the deceptive practices.

Beginning Jan. 17, the Department’s Federal Student Aid office will send emails to notify eligible former ACI students that any existing federal loans incurred as a result of attending the school will be discharged.

ACI operated five campuses in Massachusetts and three in Maryland from 2010 to 2013. The schools abruptly closed in Jan. 2013. In Nov. 2013, the Massachusetts Attorney General’s Office filed a complaint alleging the school engaged in “a range of deceptive schemes.”

Three years later, the AG’s office and ACI entered into a consent judgment in which the school admitted to a making a series of false representations to prospective students and that it misstated job placement rates for fifteen cohorts of students who enrolled between June 2011 and Dec. 2012 in order to maintain institutional accreditation. This, the judgment concluded represented a violation of the Massachusetts Consumer Protection Act.

“We’ve taken important steps to provide borrowers the relief they deserve,” U.S. Under Secretary of Education Ted Mitchell said in a statement. “This is real progress. And more work remains to ensure that relief continues for borrowers who are deceived by institutions that engage in fraud.”

In other borrower defense news, the Dept. announced Friday that it had made progress in granting relief to thousands of students who took out federal loans to attend Corinthian College Inc’s closed Heald College, WyoTech, and Everest University.

The Dept. 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, the agency said.

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.

In all, more than 28,000 claims filed by students against CCI have been approved, totaling about $558 million in loan relief.

As for the more recently closed ITT Technical Institute schools, the Dept. says that it has approved 6,300 closed school loan discharge claims for about $97 million in discharged federal loans. IT has also received 2,500 borrower defense claims from former ITT students and is beginning to award the first discharges to affected students.