- U.S. Department of Education discharges more than $6 billion in federal student loan debt of former Art Institute students, including $80 million for Massachusetts borrowers, based in part on evidence submitted by the MA Attorney General’s Office
May 01, 2024
By Highpoint Digest News
Boston, MA – (Highpoint Digest) — Massachusetts Attorney General Andrea Joy Campbell and the U.S. Department of Education announced today that more than $80 million in federal student loan debt will be discharged for over 3,500 former Massachusetts borrowers who attended the Art Institutes, including the New England Institute of Art (NEIA). NEIA was a Brookline-based predatory for-profit school that made false promises and misleading enrollment claims.
This represents one of the largest group discharges in history and is part of the Department’s larger announcement today of more than $6.1 billion in automatic student loan relief to nearly 317,000 borrowers who enrolled at The Art Institutes, a group of for-profit schools operated by Education Management Corporation (EDMC) nationwide.
The Attorney General’s Office (AGO) played a significant role in the investigations and litigations leading to the loan discharges. The announcement follows a 2018 lawsuit filed by the AGO, which alleged, among other things, that NEIA and EDMC violated the Massachusetts Consumer Protection Act by misrepresenting the likelihood of job placement to prospective students in order to induce enrollment.
The debt was incurred by students and parents of students who enrolled in Art Institutes on or after January 1, 2004, through October 16, 2017. The Massachusetts Attorney General’s Office previously submitted a group borrower defense to repayment application on behalf of former New England Institute of Art students based on its investigation into and judgment against NEIA and EDMC.
In 2019, Suffolk Superior Court entered final judgment against NEIA and EDMC, ordering them to pay restitution of approximately $60 million plus interest based on the amount of tuition paid by NEIA students. They were also ordered to pay $11,765,000 in penalties. EDMC and NEIA filed for bankruptcy in 2018.
“These predatory for-profit schools harmed vulnerable students for their own financial gain, leaving student borrowers burdened with debt and without viable job or financial prospects,” said AG Campbell. “Thanks in part to the diligent work of my office, I, alongside the Department of Education, am tremendously proud to announce meaningful debt relief for former students of The Art Institutes and help advance consumer and economic justice for these struggling borrowers.”
This group discharge will provide relief automatically to borrowers, including borrowers who have not yet applied for borrower defense. The Department will begin notifying eligible borrowers today that they are approved for discharges. Borrowers do not need to take any action. The Department will take immediate steps to pause loans identified for discharge, so borrowers do not make further payments. This ensures that they will not face any further financial demands from these loans during the time needed to process their discharges. When their discharges are processed, borrowers will see any remaining loan balances adjusted and credit trade lines deleted.
The relief announced today is the latest in a series of efforts to assist NEIA borrowers. In 2021, the AGO obtained private student loan debt relief for certain borrowers through a settlement with U.S. Bank, and in 2015, the AGO obtained $75,000 as part of a federal false claims settlement with EDMC. Those funds were used to pay down student loans provided by the state.
This matter was handled by Assistant Attorney General Diana Hooley and Deputy Division Chief Arwen Thoman, with assistance from Mathematician Dr. Burt Feinberg and Assistant Attorneys General Annie Killelea and Michael Sugar, all of the AG’s Insurance & Financial Services Division.
This matter is AG Campbell’s most recent effort to advance one of her strategic priorities to promote opportunity for all across the Commonwealth, particularly through advancing economic opportunity and consumer justice for all. Earlier this year, AG Campbell announced a $1.8 million settlement with a major student loan service provider to resolve allegations that the company failed to properly communicate with borrowers about renewing affordable loan repayment plans.
Anyone with questions about this announcement or complaints about their student loans can contact the Attorney General’s Student Loan Assistance Unit at 1-888-830-6277 or file a complaint at www.mass.gov/student-loan-assistance.
Source: Massachusetts Attorney General Andrea Joy Campbell
image courtesy of Massachusetts Attorney General Andrea Joy Campbell’s office
