Former Students of 'Predatory' Art Institutes Get $6.1 Billion in Loans Erased

Former art students at the Art Institute chain of schools nationwide are now entitled to compensation after allegations of falsified claims and fraud.

On Wednesday, the Biden administration and the U.S. Department of Education announced that over $6.1 billion would go towards erasing loans for roughly 317,000 students enrolled in any of the Art Institute campuses around the country between January 1, 2004, and October 16, 2017.

The Art Institute finished shuttering its campuses last year after investigations found that the private, for-profit organization of art schools lied to prospective students about several factors, including the average employment rate of graduates and the average salaries earned after graduating using doctored data and inflated numbers.

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“The Art Institutes preyed on the hopes of students attempting to better their lives through education,” said Richard Cordray, chief operating officer of the Education Department’s Federal Student Aid office, in a release. “We cannot replace the time stolen from these students, but we can lift the burden of their debt.”

The DOE alleges that the chain of art schools told prospective students that after graduation, over 80% of former students found employment in their area of choice, but the factual percentage was closer to 57%. The Art Institutes were also accused of inflating the “average salary” of graduates.

“For example, according to a former employee, one Art Institute campus included professional tennis player Serena Williams’ annual income to ‘skew the statistics and overinflate potential program salaries,'” the DOE said.

The Art Institutes settled with the U.S. Justice Department in 2015 for roughly $95.5 million after being accused of illegal recruiting tactics and started shuttering campuses around the country in major cities such as New York, Miami, and Los Angeles. At the organization’s peak, there were over 50 Art Institute campuses and a separate online division.

The chain’s parent company, Education Management Corporation, sold all remaining Art Institutes in October 2017, while all other schools still operating under separate management were shuttered by September 2023. EDMC filed for bankruptcy in 2018.

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Former students who took out loans during that period will start receiving emails from the DOE on Wednesday and will not have to take any action to claim refunds, as they will be issued automatically.

“We must continue to protect borrowers from predatory institutions,” U.S. Secretary of Education Miguel Cardona said in a release for the DOE. “And work toward a higher education system that is affordable to students and taxpayers.”

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