These colleges lied to students. Their loans don’t have to be paid back, feds say

Rich Pedroncelli/AP
·4 min read

UPDATE: This story has been updated to include a statement from DeVry University.

The updated story is below.

Thousands of borrowers no longer have to pay back their student loans, federal officials say.

The United States Department of Education is discharging all remaining student loans that had been taken out to attend ITT Technical Institute, according to a news release from Aug. 16. The 208,000 borrowers involved in the $3.9 billion discharge — who attended between 2005 and 2016 when the school closed — will have their loans forgiven without any action needed on their part.

Borrowers who attended but did not graduate from ITT will also have a broadened window to get their loans discharged following the school’s closure, the department announced.

The decision comes following an ongoing investigation into the for-profit institute, which has revealed that “ITT engaged in widespread and pervasive misrepresentations related to the ability of students to get a job or transfer credits, and lying about the programmatic accreditation of ITT’s associate degree in nursing,” the release says.

Prior to this latest announcement, the department had already approved $1.9 billion in discharges for 130,000 ITT students.

“ITT defrauded hundreds of thousands of students,” Federal Student Aid Chief Richard Cordray said. “By delivering the loan relief students deserve, we are giving them the opportunity to resume their educational journey without the unfair burden of student debt they are carrying from a dishonest institution.

The department also announced that DeVry University has been formally notified that it owes millions after lying about its job placement rate for prospective students between 2008 and 2015. The school will have 20 days to respond if it chooses to fight the department’s findings.

DeVry is now under new leadership, a spokesperson told McClatchy News.

“DeVry University remains deeply committed to student success and preparing students to thrive in careers shaped by continuous technological change,” the spokesperson said. “We continue to believe the department mischaracterizes DeVry’s calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached.”

An additional set of around 100 borrowers also received discharges for loans used to enroll in the Medical Assistant or Medical Billing & Coding Program at Kaplan Career Institute’s Kenmore Square location in Massachusetts. The school, which closed in February 2013, also inflated its job placement rate, according to the release.

A step in the right direction

This is the just latest round of student loans canceled by the Department of Education, many aimed at helping former students of fraudulent for-profit colleges. The Biden-Harris administration has now approved nearly $32 billion in loan relief for 1.6 million borrowers, the department says.

Several industry experts applauded the department’s decision.

Director of the Consumer Financial Protection Bureau, Rohit Chopra, said he was “extremely pleased” with the department’s latest move in an Aug. 16 statement.

“We hope that ongoing oversight will prevent further abuses like those found with ITT Tech, where students were subjected to high interest rates and illegal debt collection practices,” Chopra said. “Unfortunately, too many individuals have told me that going to college was the worst decision they ever made in their lives.”

Veterans Education Success called the decision “huge news” but asked that Congress restore GI Bill benefits to defrauded veterans.

“These students deserve to have their student loans canceled after having been so misled about the education at ITT, the transferability of credits, and employment after graduation,” Vice President of Legal Affairs at Veterans Education Success, Della Justice, said in an Aug. 16 statement.

“But it is a total shame that veterans who were cheated out of their GI Bill benefits will not get their GI Bill back.”

However, the department’s latest discharges come amid increasing pressure as the student loan payment pause is set to expire.

Since the start of the pandemic, federal student loan payments have been paused. However, payments are set to restart Aug. 31, and President Joe Biden has yet to announce whether he will extend the pause or allow it to expire.

“Targeted student loan cancellation is a small step in the right direction, but we need much more from @POTUS to end this crisis once and for all,” the Student Loan Debt Crisis Center tweeted Tuesday following the department’s announcement.

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