The recent announcement by the Biden administration regarding the forgiveness of over $6.1 billion in student debt for former students of The Art Institutes has brought attention to the once prominent chain of for-profit schools. This relief will benefit 317,000 borrowers who attended any of the Art Institute campuses across the country between 2004 and 2017.
The U.S. Department of Education, after reviewing evidence provided by the attorneys general of Iowa, Massachusetts, and Pennsylvania, found that The Art Institutes and its parent company, the Education Management Corporation (EDMC), engaged in “pervasive and substantial” misrepresentations. These misrepresentations included false information about post-graduation employment rates, salaries, and career services. Secretary of Education Miguel Cardona condemned the institutions for providing false information to students who borrowed billions to attend The Art Institutes.
The Education Department discovered that The Art Institutes falsified average salaries among graduates to mislead students. For instance, there were instances where the institution included Serena Williams’ annual income to inflate potential program salaries. Such deceitful practices misled students into borrowing money without receiving the promised benefits. Despite the findings, eligible borrowers will receive automatic forgiveness without having to go through the formal process for loan relief.
Following the investigation, EDMC sold its Art Institute campuses in 2017 and closed all existing schools under separate ownership by 2023. The bankruptcy filing in 2018 marked the downfall of the once reputable institution. It is worth noting that at one point, Goldman Sachs held a significant stake in EDMC, highlighting the involvement of major financial players in for-profit education.
The student debt forgiveness for former Art Institute students sheds light on the predatory practices prevalent in for-profit education institutions. It underscores the importance of holding such institutions accountable for their misrepresentations and ensuring that students are protected from deceptive practices. As the Biden administration takes steps towards affordable higher education, this move serves as a reminder of the challenges that students face in navigating the complex landscape of student loans and for-profit education.