Betsy DeVos

DeVos agrees to forgive loans to students who attended for-profit schools that shut down

Nov. 11, 2019
Students who attended the Art Institute of Colorado and the Illinois Institute of Art in 2018 and 2019 will have loans canceled, Education Department says.

Facing a federal lawsuit and mounting criticism, U.S. Education Secretary Betsy DeVos says she will forgive loans for more than 1,500 borrowers who attended a pair of for-profit colleges that shut down last year

CBS News reports that students who attended the Art Institute of Colorado and the Illinois Institute of Art from Jan. 20, 2018, through the end of last year will have their federal student loans canceled. Students who attended another 24 schools owned by the same company can get their loans erased if they enrolled after June 29, 2018.

The decision involves schools owned by the Dream Center company, which collapsed last year and shuttered campuses across the nation.

DeVos has faced criticism over her handling of federal loan forgiveness programs, which were expanded by the Obama administration.

Under DeVos, the Education Department has stopped processing claims from students who said they were defrauded by their schools, leaving tens of thousands of borrowers in limbo as they seek loan cancellations.

In the latest case, a federal lawsuit against the Education Department alleges that the department illegally released federal student aid to the Colorado and Illinois schools even after they lost the seal of approval from their accreditor.

Losing approval should have made the schools ineligible for funding, the suit says — but instead, they were allegedly allowed to keep operating without telling students that the institutions were in trouble.

Students of former Dream Center schools sued DeVos in October, demanding loan forgiveness and other measures.

Student Defense, a Washington advocacy group that helped file the suit, said DeVos's decision to forgive loans was a victory.

"At long last, the department is taking action to cancel the illegal debt that it issued for students who were ripped off by the Dream Center," says Eric Rothschild, the group's litigation director. He added that the group will continue its suit to make sure borrowers get the full relief they deserve.

In a separate case last month, a federal judge held DeVos in contempt of court and issued a $100,000 fine after the department violated a court order barring it from collecting loans on former Corinthian Colleges students. The department has filed an appeal.

Meanwhile, House Democrats are threatening to compel DeVos to appear at a hearing and explain why her agency has failed to provide loan forgiveness that was previously promised to thousands of former Corinthian students. 

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