Art Institutes Students Secure Big Borrower Defense Win with $6.1 Billion Group Discharge
PPSL calls on ED to act with urgency to fulfill its promise and urges Navient to recognize that the private student loans it made to AI students are also not enforceable and should be cancelled immediately
BOSTON (May 1, 2024) – In another victory for defrauded former for-profit college students, the Biden-Harris Administration today announced the approval of more than $6.1 billion in automatic student loan relief to nearly 317,000 borrowers who enrolled at any Art Institute campus on or after Jan. 1, 2004, through Oct. 16, 2017. The U.S. Department of Education (Department) found that The Art Institutes chain and its parent company, Education Management Corporation (EDMC), made pervasive and substantial misrepresentations to prospective students about postgraduation employment rates, salaries, and career services during that time.
Borrowers and former students of the Art Institutes (AI) have been calling out this wrongdoing and fighting for debt relief through borrower defense for years, urging the Department to recognize the extreme misconduct of the now-defunct schools.
In 2016, former New England Institute of Art students, with PPSL, sent a demand letter to EDMC outlining the many misrepresentations and fraud perpetrated by the school. Included in the letter was a list of demands that the former students sought from EDMC. In 2018, this information helped inform a lawsuit filed by the Massachusetts Attorney General’s Office, which alleged that the New England Institute of Art and EDMC violated the Massachusetts Consumer Protection Act by misrepresenting the likelihood of job placement to prospective students in order to induce enrollment.
EDMC also partnered with Sallie Mae (now known as Navient), to convince AI borrowers to take out private student loans to augment their federal student loans. These private loans enabled EDMC to maintain access to federal student aid dollars, and Navient benefited by being a preferred lender of federally-guaranteed student loans for AI students. Both EDMC and Navient knew students would not be able to repay these subprime loans and had a side agreement that protected Navient against losses. These private loans are not resolved by today’s federal action and will need to be addressed separately with Navient to ensure AI students get full relief.
Statement from Eileen Connor, President and Executive Director of the Project on Predatory Student Lending:
“This is a day of long-awaited justice for hundreds of thousands of former Art Institutes students. EDMC was a predatory company that targeted students from low-income and middle-class backgrounds with career aspirations in creative fields. EDMC’s incentivized recruiters to enroll students with false and misleading facts about whether AI’s expensive programs paid off. PPSL has fought alongside former Art Institutes students as they sounded the alarm for years waiting for the Department to take action and cancel their fraudulent debts. We commend the Department of Education for recognizing the widespread wrongdoing and doing right by these students. We urge the Department to take similar action for the benefit of students who attended other EDMC schools, including Argosy and Brown Mackie. We call on the Department to act with urgency to fulfill its promise to ensure that borrowers receive their cancellations in a timely and fair manner. We also urge Navient to recognize that the private student loans it made to AI students are also not enforceable and should be cancelled immediately.”
Statement from Kim Tran, former Art Institutes borrower:
"Words cannot describe how overwhelmingly life-changing this news is – for myself and hundreds of thousands of others. We have been fighting for this tooth and nail since 2015. Before organizing with other borrowers, I felt like I was out of luck and alone. Now, it’s been a decade since we officially came together and advocated for justice after being scammed by Art Institutes which robbed us of time, money, and our dreams for bettering our lives through higher education. Today is a victory and I feel so proud to have been part of this effort to deliver borrowers the relief they are owed."
Today’s announcement also comes after students represented by the Project on Predatory Student Lending in the case Sweet v Cardona reached a settlement agreement with the Department to discharge at least $6 billion in student loans for approximately 200,000 individuals with pending borrower defense applications. Many of these borrowers attended the Art Institutes and detailed the schools’ long record of misconduct in their borrower defense applications.
About the Project on Predatory Student Lending
The Project on Predatory Student Lending (PPSL) is the leading legal organization representing student borrowers against predatory for-profit colleges and the policies that enable institutions to exploit and cheat students. PPSL uses bold, strategic litigation and advocacy to demand accountability in the higher education space and influence policy solutions to create a more just and affordable education system. PPSL represents more than one million student borrowers and its work has resulted in cancellation of more than $16 billion of fraudulent student loan debt.
