The Biden administration announced on Tuesday its decision to forgive $130 million in federal debt for 7,400 students who had enrolled in a Colorado college that the government accused of deceptive practices.
Bad Business Practices
In 2021, CollegeAmerica, with three locations in Colorado, permanently shut down following a successful state lawsuit, as reported by the Department of Education. However, the Center for Excellence in Higher Education, which operated CollegeAmerica, appealed the decision.
Colorado Attorney General Phil Weiser stated that CollegeAmerica deliberately exploited students by enticing them with expensive yet subpar programs, making false promises of high earning potential and job placement. This information was conveyed in a news release on Tuesday, and Weiser emphasized that their office remains committed to safeguarding borrowers from predatory lending and assisting Coloradans burdened by student loans.
Efforts to reach the Center for Excellence in Higher Education, the entity behind CollegeAmerica, for comment were unsuccessful. Last year, the organization filed a lawsuit against the Department of Education, alleging improper targeting of their schools and unlawful withholding of funds, including reimbursements for student financial aid. The Department of Education is currently seeking to have the lawsuit dismissed.
A Concerned Leader
President Joe Biden expressed his concern, stating, “These borrowers were lied to, ripped off and saddled with mountains of debt.” This move isn't the first of its kind; the administration has previously canceled federal loans for individuals who were deceived or shortchanged by for-profit institutions. To date, the Department of Education has forgiven a total of $14.7 billion in debt, benefiting almost 1.1 million borrowers who attended now-defunct institutions like Corinthian Colleges and ITT Technical Institute.
The debt relief measures apply to students from CollegeAmerica in Colorado who attended between 2006 and July 1, 2020. The cancellation process will be automatic for these borrowers.
This action by the administration follows previous efforts to address issues with debt relief programs, including those like the Public Service Loan Forgiveness program and income-driven repayment loan plans. The Department of Education has recognized that these programs did not adequately serve borrowers as intended.
According to the Department of Education, two other instances highlight CollegeAmerica's deceptive practices. From 2006 to 2010, the college falsely claimed that one of its programs could lead to EMT certification, despite never offering qualifying EMT classes at its Colorado campuses. Similarly, between 2007 and 2017, CollegeAmerica described its financial assistance program, EduPlan, as “affordable,” despite being aware that students couldn't afford the loans associated with it.
The government's investigation, which spanned multiple years, led to the decision to provide debt relief for affected borrowers. The Department of Education has announced that federal loans will be canceled for these borrowers, regardless of whether they filed a borrower defense to repayment application—an avenue to report schools for misleading practices.
In a scathing critique directed at former President Donald Trump, President Biden declared in his Tuesday statement, “While my predecessor looked the other way when colleges defrauded students and borrowers — I promised to take this on directly, and provide borrowers with the relief they need and deserve. As long as I am president, we will never stop fighting to deliver relief to borrowers, hold bad actors accountable, and bring the promise of college to more Americans.”
The Department of Education exposed CollegeAmerica's misleading practices, which included false advertising about post-graduation earnings. Despite promising high salaries, graduates actually earned an average of just $25,000 five years after completing their education, even less than high school graduates.
Additionally, the college touted a job placement rate of 70%, which turned out to be grossly inflated. The real rate, according to the Department of Education, was a mere 40%. To inflate the numbers, the institution included graduates employed in unrelated fields like a business administration graduate working as a produce clerk and a medical specialties graduate serving as a waiter. These manipulative practices were revealed by the Department of Education's investigation.
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Starting in August, eligible individuals will receive notifications of their loan cancellation related to CollegeAmerica. Their remaining loan balances will be zeroed out, and any credit trade lines associated with these loans will be deleted. Additionally, the department will refund any payments made by these borrowers to the department.
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