$130M in student loan debt forgiveness awaits 7,400 students of shuttered for-profit college

$130M in student loan debt forgiveness awaits 7,400 students of shuttered for-profit college

The Background

The Center for Excellence in Higher Education (CEHE), a for-profit college operator, has recently come under scrutiny for its practices. One of its institutions, CollegeAmerica, which had several locations in Colorado, has been found guilty of engaging in false marketing and predatory loan schemes. These practices have led to significant financial burdens for the students who enrolled in the college.

Legal Challenges and Investigations

Over the years, the CEHE has faced legal challenges and investigations due to its deceptive practices. These investigations have revealed that the organization enrolled students using false marketing techniques and implemented predatory loan schemes. As a result, the CEHE has been held accountable for its actions and is now required to provide debt relief to the affected students.

$130 Million in Debt Relief

As a result of the investigations and legal challenges, 7,400 students who attended CollegeAmerica’s Colorado campuses between January 1, 2006, and July 1, 2020, are set to receive $130 million in automatic debt relief. This relief will help alleviate the financial burdens placed on these students due to the deceptive practices of the college.

Refunding Loan Payments

In addition to the debt relief, any loan payments that students have already made to the Education Department will be refunded. This ensures that the affected students are fully compensated for the financial hardships they have endured as a result of their enrollment at CollegeAmerica.

A State-Federal Partnership

The debt relief announcement is a result of a partnership between the Education Department and the Colorado Attorney General’s office. Richard Cordray, from the Federal Student Aid, and Colorado Attorney General Phil Weiser emphasized the importance of this state-federal collaboration in securing relief for the affected students. This partnership serves as a model for future collaborations that aim to provide relief to students defrauded by for-profit or predatory schools.

Supreme Court Ruling and Biden’s Plan

The Supreme Court recently struck down President Joe Biden’s original plan to provide up to $20,000 in student loan debt relief for millions of Americans. However, the Biden administration is actively pursuing alternative avenues to achieve this goal. The administration recognizes the significance of borrower defense, which allows defrauded student loan borrowers to have their loans discharged. This process primarily benefits former students of for-profit colleges who struggle to find employment and face higher default rates.

Biden’s Commitment to Student Loan Relief

President Biden has been vocal about his commitment to providing relief to borrowers and holding accountable those who engage in fraudulent practices. He highlighted the $14.7 billion total forgiven by his administration for borrowers whose colleges preyed on them or closed abruptly. Additionally, the administration has facilitated loan discharges through programs such as public service loan forgiveness. President Biden remains steadfast in his mission to deliver relief to borrowers and ensure that more Americans have access to higher education.

The CollegeAmerica Case

The investigation into CollegeAmerica revealed several deceptive practices employed by the institution. The Education Department, in conjunction with the state of Colorado, concluded that:

  • CEHE falsely promised prospective CollegeAmerica students that they would earn high salaries upon graduation. However, the graduates, on average, earned only $25,000 five years after completing their education, which is significantly lower than what was publicized by CollegeAmerica.
  • CollegeAmerica’s Colorado campuses used inflated and false job placement rates in their advertising, misleading potential students about their prospects upon graduation.
  • Despite high default rates on its private loans, CEHE maintained that attending CollegeAmerica was “affordable,” which turned out to be false.
  • CEHE made false claims about the availability of certain programs at the Colorado CollegeAmerica locations and misled students by suggesting that these programs would guarantee employment in specific fields.

Both CollegeAmerica and CEHE have since closed down, leaving many students burdened with debt and without the promised benefits of their education. The accrediting agency responsible for overseeing these institutions has not provided a comment on the matter.

Debt Relief Process and Future Partnerships

Individuals eligible for the borrower defense action will have the entire balances on their federal student loans zeroed out. They will receive notifications regarding the debt relief in August. The Education Department is encouraging other states to come forward and share evidence of wrongdoing by colleges in their communities. This collaborative effort aims to identify and address fraudulent practices in the for-profit education sector and provide relief to affected students nationwide.

Conclusion

The debt relief of $130 million for 7,400 students who attended CollegeAmerica’s Colorado campuses is a significant step towards rectifying the injustices caused by the deceptive practices of the now-shuttered for-profit college. The state-federal partnership between the Education Department and the Colorado Attorney General’s office sets an example for future collaborations that can bring relief to students defrauded by predatory schools. President Biden’s commitment to addressing student loan debt and holding bad actors accountable remains unwavering. The ongoing efforts to provide relief and ensure access to quality education in the United States continue to be a priority for the administration.