For-profit higher education institutions have been under fire in recent years as the government accuses some of them of overcharging and under delivering, leaving countless students jobless and with student loan debt. Many are forced to suffer in silence, but students at the now defunct American Career Institute or ACI are getting their loans discharged.
Late last week the White House announced it was eliminating the federal student loans of the for-profit’s 4,500 students to the tune of $30 million. Starting this week, borrowers who took out federal loans will receive emails from the Federal Student Aid department alerting them about a possible federal student loan discharge. Of the 4,500 who will receive discharges, the White House said it already notified 650. “ACI was a predatory, for-profit school that admitted to breaking Massachusetts law and lying to its students. Today, these students are finally getting the relief they deserve,” Attorney General Maura Healey said when announcing the relief last week.
ACI had been facing scrutiny by regulators dating back to November of 2013 when the Massachusetts Attorney General’s Office logged a complaint, contending ACI engaged in a range of deceptive practices. By 2016, the list had grown to include enough misconduct that it was actionable under the Massachusetts Consumer Protection Act. One of the more egregious charges was misstating job placement rates in order to maintain institutional accreditation.
The White House was able to forgive the loans under the borrower defense to repayment law which protects students from schools that engage in predatory practices.
For-profits only make up around 11% of the higher education population, but they account for 44% of all federal student loan defaults according to the Department of Education. Many have been accused of predatory recruiting tactics as well as low-quality courses and degrees – not to mention low employment rates for graduates.
Early last year the White took steps to reign in for-profit colleges, instituting a gainful employment rule that requires for-profit colleges and certificate programs to offer degrees that lead to gainful employment, or else lose the right to participate in federal financial aid. If annual loan payments don’t exceed 20% of borrowers’ discretionary income or 8% of their total income, then the school or program passes the rule. If a school fails to meet the standard, it could be ineligible to receive federal financial aid. Since the rule was instated and the White House got tougher on for-profits, a handful of schools have shut their doors and/or have paid fines.
Author: Andrew Rombach
Join the LendEDU Newsletter
News, insights, & tips once a weekThanks for submittingPlease Enter a valid email
Student Loan Guides
Student Loan Reviews