Biden cancels $6 billion in loan debt for Art Institute students, including Sacramento school

The Biden administration is erasing $6.1 billion in federal student debt for 317,000 former attendees of The Art Institutes, a defunct for-profit chain of art colleges, officials announcedWednesday.

There were Art Institute campuses in California that shuttered by the end of 2019, including:

? The Art Institute of California - Sacramento, a campus of Argosy University

? The Art Institute of California - Inland Empire, a campus of Argosy University

? The Art Institute of California - Los Angeles, a campus of Argosy University

? The Art Institute of California - Orange County, a campus of Argosy University

? The Art Institute of California - San Francisco, a campus of Argosy University

? The Art Institute of California - Silicon Valley, a campus of Argosy University

The discharge includes people who were enrolled at any Art Institute campus between Jan. 1, 2004, and Oct. 16, 2017, which is when the now-bankrupt Education Management Corp.(EDMC) owned about 50 of those schools.

“This institution falsified data, knowingly misled students, and cheated 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.

On Wednesday, the United States Education Department will begin notifying eligible borrowers that their debt has been forgiven. Borrowers do not need to take any action. The department said it will pause loan payments and refund past federal payments for those marked for this forgiveness.

A review by Education Department officials found The Art Institutes and their parent company misrepresented prospective students about post-graduation employment rates, salaries and career services during that 13-year time period. Various Art Institute studies included forms of design, digital media, culinary arts and fashion.

The Education Department independently reviewed evidence from attorneys general offices in Iowa, Massachusetts and Pennsylvania, it said. Previously, the states’ attorneys general had investigated and brought lawsuits against The Art Institutes and EDMC.

“For more than a decade, hundreds of thousands of hopeful students borrowed billions to attend The Art Institutes and got little but lies in return,” U.S. Secretary of Education Miguel Cardona said in a statement.

“That ends today,” he said.

School records showed that the institutes falsified and inflated employment rates in students’ fields of study by excluding information on graduates who didn’t stay in the arts and claiming people were in the arts when they didn’t have clear information on their employment, the department said.

As such, The Art Institute’s average in-field employment rate was about 57%, not 82% as the schools had advertised.

This also included boasting incorrect average salaries of graduates from different campuses, such as by including outliers like tennis star and former fashion Art Institute student Serena Williams’ annual income to inflate the average, the department said.

The department also found the institutes also relied on false salary data that didn’t match what graduates reported.

The Art Institutes exaggerated relationships with employers and did not offer ongoing career services once students graduated, the Education Department said.

Ultimately, The Art Institutes left borrowers with high amounts of debt that the schools’ falsely promised outcomes didn’t cover. Many students dropped out and defaulted on their loan payments, the Education Department said.

EDMC sold its Art Institute campuses in October 2017 to The Dream Center, a Los Angeles-based organization. By August 2019, only eight schools remained open for enrollment owned by a new foundation. The final eight institutions, which were in Florida, Georgia, Texas and Virginia Beach, closed in 2023.

This is one of the largest sets of student loan forgiveness by the Education Department.

Reducing student loan debt was a campaign promise for President Joe Biden, whose administration has approved almost $160 billion in debt cancellation for nearly 4.6 million Americans, according to the department.

One target has been debt relief for borrowers who went to colleges that the department deemed took advantage of them, closed abruptly or were covered by court settlements, including The Art Institutes.

The administration has approved almost $29 billion in forgiveness for 1.6 million borrowers who attended these types of schools, Biden said Wednesday.

This included $5.8 billion for students of the defunct Corinthian Colleges, a for-profit set of schools that Vice President Kamala Harris sued when she was California’s attorney general.

“We must continue to protect borrowers from predatory institutions,” Cardona said Wednesday, “and work toward a higher education system that is affordable to students and taxpayers.”