Students defrauded by for-profit colleges to get millions in loan repayments

By: - February 19, 2022 3:45 am

WASHINGTON — The U.S. Department of Education announced Wednesday that nearly 16,000 student borrowers would receive millions in loan repayments, after the department found that four private for-profit institutions made misleading claims about their job placement rates.

“The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” U.S. Secretary of Education Miguel Cardona said in a statement.

“Students count on their colleges to be truthful. Unfortunately, today’s findings show too many instances in which students were misled into loans at institutions or programs that could not deliver what they’d promised.”

Cardona said this was part of the Department of Education’s targeted borrower defense policy, which provides relief to students who are found to have been defrauded.

The four institutions include DeVry University, which is based in Illinois, but has 40 locations in 18 states; Westwood College, based in Colorado, which closed in 2016; ITT Nursing, based in Indiana, which filed for bankruptcy in 2016; and the Minnesota School of Business/Globe University, which closed in 2017.

“Today marks the first findings against a school, DeVry University, that is open and still enrolling new students,” Federal Student Aid Chief Operating Officer Richard Cordray, representing the department, said during a call with reporters.

Cordray said that students who attended DeVry University from 2008 to 2015 can file claims to the department. DeVry asserted that 90% of its students who graduated found employment, when the job placement rate was really about 58%.

The department will approve $71.1 million in borrower defense charges for about 1,800 former DeVry students.

“In this case, we reviewed considerable evidence showing that DeVry substantially misstated its job placement rates, and the likelihood of students finding new jobs in their field of study after graduation,” he said.

Officials at DeVry could not be reached for comment.

Cordray said that from 2007 to 2016, officials from ITT Technical Institute lied to students seeking to enroll in its associate nursing degree program.

“The program was not accredited,” he said. “And students were unable to get the benefit they were promised from their courses (of) study.”

The department plans to approve about $3 million to 130 students. This is the fourth time the department has issued discharges to students who attended that institution, for a combined $660 million in discharges for about 23,000 students who attended ITT Tech during those years.

Student borrowers who attended the criminal justice programs at the Minnesota School of Business and/or Globe University will be entitled to full borrower defense discharges, department officials said. The department has already approved about $3 million in discharges for 270 students.

The department is also approving $284.5 million in discharges to more than 11,900 student borrowers who attended beauty schools such as Corinthian Colleges, which closed in 2015, and Marinello Schools of Beauty, which closed in 2015.

Cordray said the department also found that Westwood College misled student about graduate job placement rates of 80% or higher and falsely claimed that graduates would make salaries of $50,000 or more. The department found that the salary data was based on national federal data and that graduates of the institution made half or less of those salary claims.

The Department of Education will approve about $53.1 million for 1,600 student borrowers who submit those claims.

During the Biden administration, the Education Department has distributed more than $2 billion in borrower defense discharges.

Last year, the department announced that more than 323,000 borrowers who have a permanent disability would receive $5.8 million in automatic student loan discharges.

The Biden administration has resisted lawmakers’ call to cancel up to $50,000 worth of federal student loan debt per student. The Federal Reserve estimates that the total U.S. student loan debt is more than $1.75 trillion. The Department of Education owns about 92% of that student loan debt.

White House Press Secretary Jen Psaki said during a Tuesday briefing that Biden has “forgiven $15 billion in student loans, benefiting more than 675,000 student loan borrowers since he took office.”

As part of Biden’s campaign platform, he said he would forgive up to $10,000 per student in federal student loans, but he has not directed the Department of Education to make that change. Biden has said he wants Congress to put forth legislation to cancel up to $10,000 worth of debt per student for him to sign into law.

Psaki also pointed to the pause on student loan repayment due to the coronavirus pandemic.

“No one has been required to pay a single dime in federal student loans, and he extended the hiatus of payment until May to give people some extra breathing room,” she said.



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Ariana Figueroa
Ariana Figueroa

Ariana covers the nation's capital for States Newsroom. Her areas of coverage include politics and policy, lobbying, elections and campaign finance.