Devry, ITT Tech and Minnesota School of Business alumni to receive $415 million in loan relief
Nearly half a million people have asked the department to cancel their loans under a law known as the “borrower’s defense to repayment”. Most attended colleges that went bankrupt, leaving the federal government to foot the bill for loan forgiveness.
But with DeVry, the department can, and says it will, recoup its costs. The department has identified approximately 1,800 DeVry students who are eligible for $71.7 million in debt relief.
DeVry, once one of the largest publicly traded for-profit colleges, changed ownership and became a private entity in 2018 when Adtalem Global Education sold it to Cogswell Education. University spokeswoman Donna Shaults said education Department Fraud the allegations predate the current leadership, but the school disagrees with the agency’s position.
James Kvaal, the education undersecretary, told reporters on Wednesday that the current owner would be liable for claims. Asked if the department would cut off DeVry’s access to federal student aid in light of evidence of impropriety, Kvaal said the misconduct ended several years ago but the department would keep an eye on the university.
DeVry is currently under a form of oversight known as Enhanced Cash Surveillance which requires the university to provide certain documents before accessing federal financial aid dollars.
“It’s really important to show that we are ready to take these actions against open schools and that there will be responsibilities for current owners to deter wrongdoing,” Kvaal said. “We will be monitoring very carefully whenever we have reason to believe there may be wrongdoing.”
From 2008 to 2015, the department said, DeVry misled prospective students by claiming that 90% of its graduates landed jobs in their field of study within six months of graduation. In fact, the university’s actual placement was around 58%.
“The Department of Education misrepresents DeVry’s calculation and disclosure of graduate results in some advertisements, and we disagree with the conclusions they reached,” Shaults said in a statement.
The alleged deception formed the basis of a $100 million settlement DeVry reached with the Federal Trade Commission in 2016. It also led the department in 2016 to ask DeVry to provide a letter of credit from a bank guaranteeing the availability of $68.4 million to participate in the federal financial assistance program.
That money could have been used to cover the cost of student loan releases, but the letter of credit expired last year, according to a securities filing from former DeVry owner Adtalem.
The Department of Education says the expiration of the letter of credit will not deter the agency from recouping the cost of the landfills. He expects the number of approved claims to increase as he reviews outstanding petitions from former DeVry students.
In addition to DeVry’s findings, the department will provide an additional $343.7 million in borrower defense releases to nearly 14,000 borrowers. This comes after new evidence of misconduct related to Westwood College, Minnesota School of Business/Globe University criminal justice programs and ITT Tech’s nursing program. It also includes $284.5 million in landfills for more than 11,900 students who attended schools such as Corinthian Colleges and Marinello Schools of Beauty.
All institutions are accused of lying to prospective students about their placement rates or program accreditation. College students are entitled to a discharge from their debt when their college uses illegal and deceptive tactics to persuade them to borrow.
This is the fourth finding against ITT Tech that led to the department’s approval of debt relief requests. In total, the evidence resulted in about $660 million in furloughs for about 23,000 students.
Student advocates say much more could be done.
A report released Wednesday by the Project on Predatory Student Lending details a massive fraud at ITT Tech that the authors say requires full cancellation of federal student loans held by all former enrollees. It details the school’s aggressive recruiting, pressure on students to enroll, and maximizing their student loans. The authors say memos and other documents show that this was a feature of the business model orchestrated by senior executives.
“The picture that emerges from our deep dive into the inner workings of ITT is one of a large-scale lending operation. The loans were the object, not the education or job training,” said Eileen Connor, director of the Predatory Student Loans Project. “Every student who has attended ITT is a victim of its fraud, and everyone deserves justice. Cancellation of all remaining debts of ITT is the only reasonable and reasonable course of action.
Connor and other student advocates have criticized what they say is the Biden administration’s piecemeal approach to clearing up a backlog of borrower defense claims.
Applications have piled up at the department amid a series of college closings and efforts by the Trump administration to delay and limit loan cancellations. Lawyers and borrowers hoped Biden’s team would quickly process the claims, but were disappointed by the pace of approvals and the stalling of litigation, which they said could speed up the effort.
The Biden administration has yet to resolve a Trump-era lawsuit filed by candidates demanding the department address their claims. The federal judge in the case, which involves Connor’s organization, last month criticized the department for its lack of progress on the issue. At a hearing earlier this week, attorneys for the Education Department said they were working diligently to settle the case.
Wednesday’s actions bring the total amount of relief approved by the Biden administration under defending borrowers to repayment to about $2 billion for more than 107,000 borrowers.