WASHINGTON — The Biden administration said Wednesday it will cancel $6 billion in student loans for people who attended the Art Institutes, a system of for-profit colleges that closed the last of its campuses in 2023 amid allegations of fraud.
Saying the chain has lured students with “pervasive” lies, the Department of Education is invoking its power to cancel student loans for borrowers deceived by their colleges.
“This institution falsified data, knowingly misled students, and deceived 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.
The Ministry of Education will automatically remove the loans of 317,000 people who visited an Arts Institute campus between January 1, 2004 and October 16, 2017.
The department says it is taking action after reviewing evidence from the attorneys general of Massachusetts, Iowa and Pennsylvania, who previously investigated fraud complaints and sued the profit chain.
According to the department’s findings, the chain misled students about graduate success and about employment partnerships that would help students find jobs.
The chain told prospective students that more than 80% of graduates found jobs in their field, but that was largely based on manipulated data, the Ministry of Education said. The actual labor participation rate was below 57%.
Campuses also advertised graduate salaries that were based on fabricated data and included extreme outliers to make averages look better, the department said.
At one campus, tennis star Serena Williams’ annual salary was included to skew the average salary, researchers found. Williams studied fashion at the Art Institute of Fort Lauderdale, Florida.
The chain’s tactics led borrowers to borrow large amounts of debt for programs that were not profitable, the department said.
“The arts institutions benefited from the hopes of students seeking to improve their lives through education,” said Richard Cordray, Chief Operating Officer of the Department of Education’s Federal Student Aid Office. “We cannot replace the time stolen from these students, but we can alleviate the burden of their debt.”
On Wednesday, the Department of Education will begin emailing borrowers whose loans are being canceled. They do not have to take any action and payments already made on the loans will be repaid.
At its peak, the chain had dozens of campuses across the country, including in New York, Chicago, Miami and Los Angeles. It was operated for decades by Education Management Corp., which filed for bankruptcy in 2018 after years of legal troubles.
The company reached a $95.5 million settlement with the Justice Department in 2015 over allegations of illegal recruitment tactics. Soon after, it began closing campuses and later sold the rest to another company.
The last eight campuses closed last year.
The Biden administration has continued to cancel student loans through several existing programs, even as it pursues a broader one-time cancellation plan. That plan is a follow-up to a plan that the Supreme Court rejected last year.
In all, the Democratic administration says it has approved the cancellation of nearly $160 billion in student loans, including through programs for government workers and those defrauded by their schools.
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