Billions in Debt Forgiven for Students of Defunct Art Institutes

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The Art Institutes Fall 2016 fashion show in New York City (photo Frazer Harrison/Getty Images)

The United States government has canceled $6.1 billion in student debt for borrowers who attended the Art Institutes, a now-defunct chain of for-profit colleges that shut down the remainder of its campuses in September 2023 amid allegations of fraud, including illegally recruiting students using inflated advertised employment rates.

“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,” read a press release from the US Department of Education. “We must continue to protect borrowers from predatory institutions — and work toward a higher education system that is affordable to students and taxpayers.”

The loans of 317,000 people who attended any of the Art Institutes between January 1, 2004, and October 16, 2017, will be automatically canceled.

Not to be confused with the unaffiliated School of the Art Institute of Chicago, the Art Institutes were a network of private art schools with 50 campuses nationwide. The Department of Education found that the schools and their parent company, the Pittsburgh-based Education Management Corporation (EDMC), made “pervasive and substantial misrepresentations” to prospective students, such as falsely advertising that over 80% of graduates obtained employment in their fields of study within six months of graduation.

In 2015, EDMC reached a $95.5 million civil settlement to resolve fraud allegations, in addition to a $102.8 million settlement with 39 states and the District of Columbia to forgive outstanding debt held by more than 80,000 former students. In 2017, the Los Angeles-based Christian nonprofit Dream Center Education Holdings acquired 31 of the chain’s schools before abruptly shuttering their doors two years later, leaving approximately 26,000 students adrift with no warning.

The network of colleges “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 yesterday, May 1.

“We cannot replace the time stolen from these students, but we can lift the burden of their debt,” said Federal Student Aid Chief Operating Officer Richard Cordray.

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