Biden Admin Forgives $6B in Debt for Former Art Institute Students

• The Department of Education will forgive debt for over 300,000 former Art Institute students.
• ED found that the Art Institute misled potential students with inflated job placement rates.
• This appears to be the biggest debt forgiveness action aimed at any for-profit institution under the Biden administration.
• Former students need not take any further action to qualify for debt forgiveness.

Many former Art Institute students will soon see their remaining federal student loan debt balance cleared.

The Biden administration announced May 1 that the Department of Education (ED) would automatically forgive all remaining federal student debt for people who attended any Art Institute campus between Jan. 1, 2004, and Oct. 16, 2017. ED will also refund all payments borrowers made toward student debt used to pay for an Art Institute education.

The move is expected to aid nearly 317,000 borrowers and erase some $6.1 billion in total debt.

"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. That ends today," ED Secretary Miguel Cardona said in a statement. "We must continue to protect borrowers from predatory institutions — and work toward a higher education system that is affordable to students and taxpayers."

ED worked with attorneys general from Iowa, Massachusetts, and Pennsylvania to make this decision. Investigations from these states found that the Art Institute and former owner Education Management Corporation (EDMC) misrepresented job placement rates, post-graduation salaries, and job opportunities for graduates during a nearly 14-year period.

EDMC sold its Art Institute campuses in October 2017 and the remaining campuses shuttered in September 2023, according to ED.

Total Debt Relief for Former Students

ED stated that it will begin notifying borrowers immediately if they qualify for debt forgiveness.

Borrowers will see complete forgiveness of all federal student loans taken out to attend an Art Institute campus. Loans used to attend a college or university other than the Art Institute will remain.

ED also promised to refund past payments on loans used to pay for an Art Institute education.

Borrowers don't need to take any further action to qualify for debt forgiveness, according to ED. The department will automatically discharge debt without the need to submit a borrower defense to repayment application.

President Biden's administration has now forgiven $160 billion in student loans during his presidency, ED stated. His administration has dialed in on for-profit institutions. And this latest relief for former Art Institute students appears to be the biggest forgiveness action affecting former students of a for-profit institution thus far, at least in terms of total dollars forgiven.

Previously, the largest debt forgiveness action applied to 560,000 former students of Corinthian Colleges, which erased $5.6 billion in debt.

A History of Misleading Students

ED laid out a history of deceptive practices the Art Institute and EDMC employed to recruit students.

Based on evidence provided to ED by state attorneys general, the department found that the Art Institute inflated the job placement rates for graduating students. The Art Institute advertised that more than 80% of graduates found employment in a related field within six months of graduation.

The Art Institute stretched this percentage by counting graduates as "employed in-field" even when the student's job was unrelated to their field of study or when the Art Institute didn't know the graduate's job title.

In reality, the institution's job placement rate was below 57%, ED stated.

The Art Institute similarly inflated graduate earnings data. A former employer told ED that in at least one instance, another employee used salary.com to determine that a graduate's salary was $25,000 when the former student reported an $8,000 salary.

Lastly, ED found that the Art Institute exaggerated its partnerships with employers.

"In fact, the school had a negative reputation, so companies generally did not want to hire its graduates," ED wrote in a statement.

ED added that students did not have access to career services after graduation.

"Once students graduated," ED wrote, "school staff did not return their phone calls."

Effective Sept. 30, 2023, all remaining Art Institute campuses shuttered. According to the system, the closure affected eight campuses.