The Biden administration will automatically cancel $130 million in federal student loan debt held by 7,400 former students of the defunct for-profit chain CollegeAmerica, the Education Department said Tuesday.
The decision covers people who were enrolled in the Colorado locations of CollegeAmerica, a chain of career schools that closed in 2021, between Jan. 1, 2006, and July 1, 2020. Former students are not required to submit an application and will receive refunds of payments made on their federal loans unless they are commercially held. Borrowers will receive notification in August from the Education Department of the pending discharge.
“These borrowers were lied to, ripped off, and saddled with mountains of debt,” President Biden said in a statement Tuesday. “While my predecessor looked the other way when colleges defrauded students and borrowers – I promised to take this on directly, and provide borrowers with the relief they need and deserve.”
With Tuesday’s announcement, the Biden administration has now approved more than $116 billion in loan forgiveness to 3.4 million borrowers. Of those borrowers, 1.1 million attended colleges that defrauded them or abruptly closed, according to the White House.
The Education Department approved the CollegeAmerica discharges using evidence provided by Colorado Attorney General Phil Weiser. The attorney general’s office found CollegeAmerica lied about its graduates’ salaries, job placement rates and whether some academic programs met state licensing requirements. State authorities also discovered the college marketed its in-house private loans as affordable, even though as many as 70 percent of borrowers who were enrolled in the Colorado campuses defaulted.
“Today’s announcement shows how different parts of government can work together to deliver relief to those who’ve been taken advantage of,” Richard Cordray, who heads the Federal Student Aid office at the Education Department, said on a call with reporters Tuesday. “We’re grateful to our partners for their diligent and careful work.”
Colorado’s investigation of CollegeAmerica’s parent company, the Center for Excellence in Higher Education, began in 2012 and culminated in a 2017 lawsuit. The state won its case three years later and gave the department a cache of internal emails, procedures and policies from the Center. The department said it reviewed the testimony of 40 witnesses, including former students and officials from the Center.
“It has been a long road to get to this day,” Weiser said on a call with reporters. “Our office has been at this for over a decade. The announcement today gets to the heart of what these student borrowers suffered.”
Officials at the Center for Excellence in Higher Education did not immediately respond to requests for comment.
Within months of the 2020 court verdict, the Accrediting Commission of Career Schools and Colleges withdrew its seal of approval from the career colleges operated by the Center – Independence University, Stevens-Henager College, California College San Diego and CollegeAmerica – for failing to meet its standards.
After that, the Education Department placed the colleges under a form of oversight that requires schools to provide certain documentation before accessing federal financial aid dollars. The loss of accreditation and heightened federal scrutiny crippled the schools, and by August 2021, the Center closed its remaining campuses.
The Center for Excellence in Higher Education has long had a fraught relationship with the Education Department. The nonprofit filed a lawsuit against the federal agency in December, accusing the department of trying to undermine its operations for years.
The department in 2016 blocked the Center’s attempt to convert its career schools from for-profit to nonprofit institutions. It said the schools could not be considered nonprofits if the former owner, Carl Barney, retained primary control and received revenue from the colleges. The Center fought the decision, which the Trump administration reversed in 2018.
Send questions/comments to the editors.
