The Obama administration on Friday announced the automatic cancellation of $30 million in federal student loans held by 4,500 people who attended American Career Institute, or ACI, a defunct career college that operated in Massachusetts and Maryland.
The widespread loan discharge is the result of admissions by the school that it made false and misleading representations to students, misstated job placement rates and employed instructors who were unauthorized to teach. The government can wipe away federal education loans if a school used illegal or deceptive tactics to persuade students to borrow money for college — a law known as “borrower defense to repayment” that has cleared the way for ACI students.
Beginning next week, education officials will email borrowers about the cancellation of any existing federal student loans incurred as a result of enrolling in ACI’s five campuses in Massachusetts. About 650 of the eligible students have already received debt relief because they were attending the school when it closed, according to the department.
Although ACI had locations in Columbia, Wheaton and Baltimore, the group discharge does not extend to students in Maryland because the company’s admission of wrongdoing was solely tied to a consent judgment obtained by the Massachusetts attorney general. But Maryland has a tuition reimbursement fund available to the 846 students who attended ACI schools in the state. For more information, visit the Maryland Higher Education Commission website.
Massachusetts Attorney General Maura Healey (D) won a judgment against ACI in June that forced the company to come clean about fabricating records and lying about graduation and job placement rates to bilk students out of millions of dollars. The judgment made the case for the department to grant group forgiveness.
“This is the result of a lot of hard work over many years by dedicated lawyers and investigators in my office who have made accountability and protecting students a top priority,” Healey said at a news conference Friday. “ACI was a predatory for-profit school that admitted to breaking Massachusetts law and lying to students.”
Healey’s investigation found that ACI administrators inflated job placement rates by counting graduates as working in their field when they were not, excluding students who had withdrawn from class and counting students working at companies that did not exist. According to the lawsuit, ACI also failed to inform prospective student in its medical, dental and security programs that their criminal history could disqualify them from employment in their fields.
Investigators uncovered evidence of school administrators forging student signatures on enrollment forms as well as altering grades and attendance to meet accreditation requirements. ACI admitted in court to failing to provide software and other course materials students had paid for, and it acknowledged using unlicensed instructors.
Before shutting down in 2013, the school collected more than $30 million in federal student aid in a year by charging up to $23,000 in tuition and fees for medical assisting, information technology and other certificate programs.
“Some days the good guys win, and today is one of those days,” said Sen. Elizabeth Warren (D-Mass.) at the news conference Friday. “When for-profit colleges build a profit model around scamming students, then students shouldn’t be left holding the bag.”
Warren has been a staunch advocate for students defrauded by for-profit institutions. The progressive leader has urged Education Secretary John B. King Jr. to automatically cancel the federal debt of students facing some form of debt collection as a result of borrowing to attend Corinthian Colleges. Warren and a host of consumer advocates have been critical of the glacial pace of loan forgiveness granted to Corinthian students through the borrower defense process.
On Friday, education officials said the federal agency is making progress in adjudicating the Corinthian claims. They have granted relief to more than 12,000 students since October, when the last progress report was released. All told, more than 28,000 defense claims submitted by former Corinthian students have been approved, representing about $558 million in loan forgiveness, according to the department. Still, that is fraction of the 250,000 Corinthian students the agency estimates might be eligible for debt relief.
The Education Department has been flooded with debt cancellation requests since ITT Technical Institutes closed in September. Of the 14,200 applications for closed school loan discharge submitted by ITT Tech students, 6,300 have been approved, with the remaining denied because of ineligible or incomplete applications, the department said. The agency has also received over 2,500 defense claims from ITT Tech students and is beginning to award the first set of discharges.
“We are delighted that the first of many ITT borrowers who are entitled to relief will receive it,” said Eileen Connor, counsel for a group of ITT Tech students suing the parent company. “We look forward to working with the department to address the consequences of ITT’s systemic illegal and predatory practices. The department’s actions today confirm that where wrongdoing was widespread, relief can and should be automatic.”
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