The Department of Justice found that Education Management Corp. falsely obtained the $11 billion in federal funding it had received between 2003 and 2011. In 2015, the company agreed to pay $95 million in a settlement with the government to resolve allegations of illegal recruiting, consumer fraud and other violations.
That same year, dozens of attorneys general, including those in Alabama, California and Texas, reached a $100 million settlement with the company, which resulted in some loan forgiveness for thousands of former students in states across the country. (For example, eligible students in New York received an average of around $1,300 in loan relief.)
Still, the federal government continues to collect on the federal loans of thousands of other former Art Institute students, in some cases garnishing their wages and seizing their tax refunds.
None of the requests for debt forgiveness from former Education Management Corp. students, which are up by nearly 60 percent in the last year, have been approved by the federal government, according to Toby Merrill, director of the Harvard Law School’s Project on Predatory Student Lending.
In theory, there’s been a provision in the law for defrauded students to have their federal loans canceled since the 1990s, she said, however, “the government’s willingness to create a process to actually effectuate that right is in serious flux.”
The current administration is working to find a process that’s fair to both schools and students, Urdan said. The regulation under Obama, he said, was “incredibly loaded against the schools.”
“The principal at work in the DeVos department is to say, we want to find a middle ground,” he said. “We want to forgive legitimate harm but not create this free-for-all.”
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