Biden Approves $6.1 Billion in Student Loan Debt Relief for Art Institute Borrowers

The Biden administration has approved the cancellation of over $6.1 billion in student loan debt held by 317,000 borrowers who previously attended The Art Institutes, a now-defunct network of for-profit colleges. The Department of Education found that the schools misled prospective students about graduates' job placement rates and average salaries between January 1, 2004 and October 16, 2017, when the schools were owned by Education Management Corp.

This debt relief is being provided under the borrower defense to repayment program, which allows borrowers to seek relief if they have been defrauded by their college. The Education Department will notify eligible borrowers and refund any payments they have made on the loans that are being forgiven. Impacted loans will be put on pause so borrowers do not have to make any payments while the relief is processed.

Why this matters: This is one of the largest group discharges of federal student loans by the Education Department under the Biden administration, which has now provided a total of $160 billion in student loan relief for 4.6 million borrowers. The administration has canceled 10% of all outstanding federal student loan debt through various actions aimed at fixing broken student loan programs and providing relief to borrowers whose colleges took advantage of them.

The legal actions taken by officials in Massachusetts, Iowa, and Pennsylvania laid the groundwork for this federal debt cancellation plan. "The Art Institutes schools knowingly misled students about post-graduation employment rates and exaggerated industry relationships," according to the Department of Education's findings. The schools falsified average graduate salaries, including using professional tennis player Serena Williams' annual income to inflate potential program salaries.

EDMC filed for bankruptcy in 2018 and sold the remaining Art Institute campuses in 2017, which closed under separate ownership in 2023. Over the last three years, the Biden administration has approved nearly $29 billion in debt relief for 1.6 million borrowers who were defrauded by their schools, compared to just 53,500 borrowers who had ever gotten their debt cancelled through these types of actions before Biden took office. In total, the administration has approved debt cancellation for nearly 4.6 million Americans through various actions and is pursuing new plans that would cancel student debt for more than 30 million borrowers.

Key Takeaways

• Biden admin cancels $6.1B in student loans for 317K Art Institutes borrowers.
• Borrowers defrauded by schools' misleading claims about job placement, salaries.
• Largest group discharge under Biden, totaling $160B in relief for 4.6M borrowers.
• Biden admin has approved $29B in debt relief for 1.6M defrauded borrowers.
• Admin pursuing plans to cancel student debt for over 30M borrowers.