Education department to erase $415 million in student loan debt for nearly 16,000 borrowers
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Thousands of students have filed fraud complaints against their university or college and now many are set to have their student loan debts erased as the U.S. Department of Education approved $415 million in borrower defense claims.
The U.S. Department of Education announced Wednesday that nearly 16,000 student borrowers will receive $415 million in borrower defense, a legal provision that promises loan relief for defrauded borrowers, after it found multiple schools misled students.
Devry University was found to have misrepresented its job placement rates, alongside new findings related to Westwood College, the nursing program at ITT Technical Institute, and the criminal justice programs at Minnesota School of Business/Globe University and Corinthian Colleges.
Approximately 1,800 former DeVry University students will get about $71.7 million in full borrower defense discharges after the Department found the school made widespread, substantial misrepresentations about its job placement rates—and that number is expected to grow as the department continues to review outstanding claims from former DeVry students.
“The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards. Students count on their colleges to be truthful. Unfortunately, today’s findings show too many instances in which students were misled into loans at institutions or programs that could not deliver what they’d promised,” said Miguel Cardona, U.S. Secretary of Education, in a statement.
From 2008 to 2015, DeVry advertised that 90 percent of its graduates who actively seek employment got jobs in their field of study within six months of graduation. The Department found that to be false and that DeVry’s actual job placement rate was around 58 percent, as more than half of the jobs included in the claimed 90 percent placement rate were held by students who got a job well before graduating from DeVry and before they had even enrolled at the school.
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The department also noted that DeVry excluded the large number of students who were actively looking for work but weren’t conducting their job search in a way that the University’s Career Services department preferred.
On top of all that, the department found that senior DeVry officials knew the 90 percent job placement rate was problematic for years, partly due to concerns about its accuracy that were raised by alumni.
DeVry has been in hot water before over its disputed 90 percent job placement rate, as well as advertising that graduates with bachelor’s degrees from DeVry on average had 15 percent higher incomes one year after graduation than graduates with bachelor’s degrees from all other colleges and universities.
That prompted lawsuits by former students against the university and eventually in 2016 the Federal Trade Commission (FTC) reached a $100 million settlement with DeVry, which included $49.4 million to be paid in cash to qualifying students who were harmed by the deceptive claims and $50.6 million in additional debt relief.
Misleading claims by universities appeared to be a trend, as the department said that Westwood College also made substantial misrepresentations to students about their salary potential and likelihood of finding a job after graduation. The college also made misleading claims about the ability to transfer credits and that students in its criminal justice program in Illinois would be able to find jobs as police officers.
ITT Technical Institute (ITT) was found to have misled prospective students about its programmatic accreditation of the associate degree in nursing program, telling students that the nursing program had already or would shortly obtain accreditation. That plays a big role in students’ ability to get a nursing job, but ITT failed to meet standards to obtain the necessary programmatic accreditation for years.
Minnesota School of Business and/or Globe University were found to be in a similar situation, with the department reporting the school had committed fraud when it told students that its criminal justice programs would allow them to become a Minnesota police officer or parole/probation officer. In reality, the programs lacked the necessary accreditation and certification, making it impossible for students to get those types of jobs.
This is likely not the last time the department will act on behalf of defrauded students, as it currently faces Sweet v. Cardona, a lawsuit that was initiated under former President Trump. Over 200,000 former students moved to have their federal student loans discharged after they believe their for-profit colleges made false promises to students regarding high-paying jobs, state-of-the-art vocational training and long and fulfilling careers.
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