Thousands of student-loan borrowers are receiving automatic debt relief after President Joe Biden’s Education Department accused their school of wrongdoing. The Education Department announced that it will deliver $130 million in debt cancellation to 7,400 students who were enrolled at Colorado-based locations of CollegeAmerica between January 1, 2006 and July 1, 2020. CollegeAmerica, operated by the Center for Excellence in Higher Education, was found to have made misleading statements about employment rates, loan products, and program offerings. The Federal Student Aid Chief, Richard Cordray, expressed that this debt relief provides a fresh start for students impacted by CollegeAmerica’s misconduct.
The investigation into CollegeAmerica began in 2012 by the Colorado Attorney General, and a bench trial in 2017 ruled that CEHE had violated consumer protection laws. The findings of the investigation formed the basis for the Education Department’s decision to grant debt relief. The department discovered that CollegeAmerica Colorado campuses had inflated job placement rates, with internal figures showing only 40% actual placement instead of the advertised 70%. CEHE also misled students about the affordability of their private loan product and offered programs and qualifications that did not exist.
The Education Department will notify eligible borrowers in August and wipe out their remaining balances. Additionally, any payments made by borrowers on their Colorado-based CollegeAmerica debt will be refunded. CEHE filed a lawsuit against the Education Department in 2022, claiming that its actions forced the company to close. This debt relief action is part of the Education Department’s efforts to approve group discharge of borrower defense claims.
Biden emphasized the administration’s commitment to providing relief for borrowers and holding accountable institutions that defraud students. He highlighted that under his administration, $14.7 billion in relief has been approved for 1.1 million borrowers, and a total of $116 billion in debt relief has been granted to over 3.4 million Americans. The Education Department encourages states to submit group applications to provide evidence of wrongdoing by other institutions and help their residents receive debt relief.