The decision stems from a lawsuit brought in October by former students at the Art Institute of Colorado and the Illinois Institute of Art against the department and Education Secretary Betsy DeVos. The plaintiffs accuse the agency of providing loans even though Education Department officials knew the schools were not accredited and, as a result, ineligible to receive such aid. The former students have argued that they should not be forced to repay loans that were issued unlawfully.
“Expanding the eligibility window back to January  means justice for more students,” Eric Rothschild, an attorney at the National Student Legal Defense Network who is representing the students, said Thursday. “The Illinois Institute of Art and the Art Institute of Colorado were lying to students from the moment they lost accreditation in January 2018, and students deserve relief that reflects the full extent of that deception.”
Documents released in October by the House Education Committee show that the department provided $10.7 million in federal aid to students at the two Art Institute of Colorado locations, the Art Institute of Michigan and the Illinois Institute of Art in Chicago and Schaumburg for the 2018 spring semester. None of those campuses was fully accredited at the time.
Dream Center Education Holdings, which owns the Art Institutes and Argosy University, kept students in the dark about the status of the schools despite instructions to spread the word, according to the Higher Learning Commission, its accreditor. The Higher Learning Commission had raised concerns about the quality of education at the campuses and downgraded their status for up to four years while reviewing the Dream Center’s 2017 acquisition of the Art Institute and Argosy campuses.
The Higher Learning Commission issued a public notice in January 2018 and notified state education agencies and the Education Department of its decision. Still, the federal agency continued issuing loans to Art Institute students, even though for-profit colleges must be fully accredited to participate in federal student aid programs.
The for-profit schools’ downgraded designation as “pre-accredited” institutions prohibited them from receiving federal student aid, although nonprofit schools with the same status can receive aid. According to letters obtained by the House committee, the Education Department in May 2018 retroactively designated the schools as nonprofits effective Jan. 20, 2018, the date they lost their accreditation. That means they could receive federal student aid.
Education Department spokeswoman Angela Morabito said Thursday that the agency maintains that the schools remained accredited through the change in ownership.
“Because [the Higher Learning Commission] appears to have violated its own policies and our regulations, and harmed students by claiming these schools were unaccredited, the Secretary has used her discretion to extend the lookback period,” Morabito said.
The commission has said the accreditation status that was applied to the Dream Center schools had been in place since 2009.
Weeks after the revelations from the House committee, DeVos said the department would grant debt relief to 1,500 students who took out loans to attend Art Institute campuses between Jan. 20, 2018, and Dec. 14, 2018. The secretary also extended the window for closed-school discharge to six months for students at 24 other Dream Center schools — including Argosy locations — that closed. The extension benefited fewer than 300 students.
The Education Department estimates this week’s decision to further expand eligibility could help more than 790 students.
The latest extension still falls short of what state attorneys general and liberal lawmakers requested. A bipartisan group of attorneys general from 25 states and the District this week urged DeVos to cancel the federal loans of all students who attended Dream Center schools that closed in 2018 and 2019.
The attorneys made an argument similar to what congressional Democrats had advanced in March when they asked DeVos to extend the timeline to October 2017, when the department approved the Dream Center’s acquisition of the schools. Lawmakers argue that students should not be on the hook for loans made since then because the department rescinded its approval after learning that the Dream Center misused millions of dollars in federal student aid to cover operating expenses.