Biden Cancels $6 Billion in Debt for Grads of Failed Art Institutes

The White House has forgiven $6.1 billion in loans for Art Institutes graduates.

That’s because, the Department of Education said in a news release Wednesday (May 1), those graduates were lied to by the now defunct chain of for-profit arts schools, the subject of years of investigation and litigation around the country.

“The Art Institutes preyed on the hopes of students attempting to better their lives through education,” Federal Student Aid Chief Operating Officer Richard Cordray said.

“We cannot replace the time stolen from these students, but we can lift the burden of their debt. We remain committed to working with our federal and state partners to protect borrowers.”

The loan forgiveness applies to nearly 317,000 borrowers who were enrolled at any Art Institute campus on or after Jan. 1, 2004, through Oct. 16, 2017.

It comes in the wake of investigations by the attorneys general offices of Iowa, Massachusetts and Pennsylvania into the Art Institutes and parent company Education Management Corporation (EDMC).

Those investigations found that the Art Institutes misled prospective students by inflating its post-graduate employment rates, the Department of Education said, claiming that 82% of its alumni found jobs in their field of study within six months after graduating, when the number was no higher than 57%.

In addition, the investigation found that the Art Institutes also told prospective students that it had partnerships with employers, though evidence showed this was an exaggeration.

“In fact, the school had a negative reputation, so companies generally did not want to hire its graduates,” the release said. “Former employees and borrowers also described that graduates did not have access to ongoing career services after leaving school. For example, once students graduated, school staff did not return their phone calls.”

The Art Institutes closed all of its schools in September of last year. EDMC filed for bankruptcy in 2018 and began liquidating its assets.

The news comes three weeks after President Joe Biden announced the government was providing debt relief to a few other groups of students. Included in this round were those who owe more now than when they started repayments due to interest, borrowers who began making repayments 20 or more years ago, people who went to schools that “failed accountability measures or failed to provide students with sufficient financial value,” and borrowers undergoing financial hardships.