In Brief

Former Students of the Shuttered Art Institutes Given Chance at Loan Forgiveness

A lawsuit filed in October of 2019 will allow some of the 26,000 affected students opportunities to have their loans canceled through the Education of Department’s closed-school discharge program.

The Art Institute of Colorado (photo by Craig Talbert via Flickrstream)

Last year, a university franchise that operated 40 colleges across the United States shuttered its campuses abruptly and left thousands of students with crushing student loan debt and axed academics plans. Now, following a lawsuit filed in October of 2019, some of these students are getting a chance at loan forgiveness.

More than 26,000 students were enrolled in the college network owned by the Christian nonprofit Dream Center Education Holdings. The nonprofit’s holdings included Argosy University, South University, and the Art Institutes.

In the new agreement, some Art Institute students will have their debts canceled through the Education of Department’s closed-school discharge program, the Washington Post reports. Borrowers are normally eligible to ask for debt forgiveness if they were enrolled, on approved leave, or had withdrawn within four months of their college closing. But in today’s announcement, the department guaranteed that this time frame will be extended to nearly a year.

The school network began to crumble in the summer of 2018, when the nonprofit announced the sudden closure of 18 Art Institutes, nine Argosy University sites, and three South University campuses. By the end of the year, Dream Center faced eviction on at least nine campuses and owed creditors more than $40 million.

It was later revealed that the college network lost accreditation in January 2018 but did not notify its students about its downgraded status until June 20. Meanwhile, students completed two terms of unaccredited courses, still assuming and accumulating student loan debts.

Last summer, House Democrats accused Secretary of Education Betsy DeVos of helping Dream Center avoid culpability. They claimed that officials at the education department helped the franchise regain its accreditation, while it kept its students in the dark. The department denied these allegations and deflected the blame onto the Higher Learning Commission, which stripped the network from its accreditation due to poor academic standards.

In October of 2019, former students at the Art Institute of Colorado and the Illinois Institute of Art sued the department and DeVos in a Colorado court. The court documents showed that the department continued to provide aid to the college network, although it was ineligible to receive federal aid after losing its accreditations.

For-profit colleges must be fully accredited to participate in federal student aid programs. The former students argued in court that they should not have to repay loans that were issued against the law.

Following the outcry, the department announced in November of 2019 that it will cancel federal loans provided in 2018 to students at four Art Institutes locations — Art Institute of Michigan, Illinois Institute of Art in Chicago and Schaumburg. The decision benefited 1,500 students who took out loans to attend Art Institutes campuses between January 20, 2018 and December 14, 2018. Students who used federal Pell grants to attend the schools that closed before they could finish their studies had their eligibility for Pell aid restored. DeVos also extended the window for closed-school discharge from four to six months for students at 24 other Dream Center schools, including Argosy locations, that had been shuttered. The extension helped include about 300 more students in the eligibility time period.

Now, with the new extension, 790 more students are expected to be relieved of their debts.

“Expanding the eligibility window back to January [2018] means justice for more students,” Eric Rothschild, an attorney at the National Student Legal Defense Network who is representing the students, said in a statement. “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.”

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