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Data American Career Institute Borrowers to Receive Automatic Group Relief for Federal Student Loans
                                                          Archived InformationAmerican Career Institute Borrowers to Receive Automatic Group Relief for Federal Student Loans
Education Department Announces Continued Progress with Borrower Defense and Closed School Loan Discharges
January 13, 2017
**Contact:** Press Office, (202) 401-1576, press@ed.gov
The U.S. Department of  Education (ED) announced today plans to grant borrower defense relief for  federal student loan borrowers who attended the now-defunct American Career  Institute (ACI) in Massachusetts. This move follows the Department's  investigation as well as numerous admissions by the school that it made false  and misleading representations to students, misstated job placement rates and  employed instructors who were unauthorized to teach under applicable state  laws. ED also announced substantial progress with processing borrower defense  claims from former Corinthian Colleges Inc. (CCI) students, and that approvals  are beginning for borrower defense claims from former ITT Technical Institutes  (ITT) students. Additionally, ED announced that a significant number of closed  school loan discharges have been approved, particularly for students impacted  by the recent closure of ITT.

"With the help of state attorneys general, we've cracked down on  bad actors that leave students with debt but meaningless credentials. We are  especially grateful to Attorney General Healey and her team for investigating  and uncovering ACI's deceptive practices." said U.S. Under Secretary  of Education Ted Mitchell. "We've taken  important steps to provide borrowers the relief they deserve. This is real  progress. And more work remains to ensure that relief continues for borrowers  who are deceived by institutions that engage in fraud."

Beginning Jan. 17,  borrowers who used federal loans to attend ACI programs in Massachusetts will  begin receiving emails from Federal Student  Aid informing them that any existing federal  loans incurred as a result of enrolling at ACI will be automatically  discharged. Of the roughly 4,500 students who attended ACI, 650 have already  received closed school loan discharges. The remaining students will receive  automatic borrower defense discharges.

"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. "I thank Secretary King and the Department  for utilizing its authority to grant immediate group relief to our students,  and the dedicated lawyers and investigators in my office for building the case  against ACI. Our office will continue to help students struggling with  unaffordable debt and hold predatory schools accountable for their illegal conduct."

ACI enrolled roughly 4,500  students at five campuses in Massachusetts between 2010 and 2013. The school  became the subject  of a complaint filed by the Massachusetts  Attorney General's Office (MA AGO) in Nov. 2013 alleging the school engaged in  "a range of deceptive schemes." By June 2016, the MA AGO and ACI entered into a consent  judgment which included numerous admissions  that ACI made a series of false representations to prospective students and  engaged in misconduct that is actionable under the Massachusetts Consumer  Protection Act. These representations include purposefully misstating job  placement rates for fifteen cohorts of students who enrolled between June 2011  and Dec. 2012 to maintain institutional accreditation.

The combined loan  discharges and  refunds of amounts already paid by ACI borrowers  announced today will total roughly $30 million.

Continued Progress with  Borrower Defense and Closed School Discharge Relief

The Department is making  continued progress with adjudicating borrower defense claims and processing  closed school loan discharges for impacted borrowers.  The Department has  approved more than 12,000 additional claims from borrowers deceived by CCI's  falsified job placement rates since the most recent borrower  defense claims report released in Oct.  2016.  Additionally, the Department has approved two additional types of  borrower defense claims: those involving misrepresentations about the  transferability of credits as the basis for debt relief, and those involving  CCI's false guarantees of employment for graduates.  To date, more than  28,000 total CCI claims have been approved, representing approximately $558  million in loan relief.

In Sept. 2016, ITT  informed ED of its plans to cease operations. Following this announcement, ED  launched an extensive  outreach campaign to inform  impacted students about their two primary  recourses—seek federal student loan relief through closed school loan  discharge, or attempt to transfer credits to another institution and continue  their studies in a comparable program of study. To date, ED has received  roughly 14,200 applications for closed school loan discharge from former ITT  students. Approximately 6,300 have been approved totaling approximately $97  million in loan relief. Roughly 5,000 claims have been denied due to ineligible  or incomplete submissions.  ED has also received over 2,500 borrower  defense claims from former ITT students and is beginning to award the first  discharges to affected students.

ED has already informed the vast majority of borrowers who have submitted claims that have been approved, but not yet discharged, of their approval status. Over 23,000 have already received an email notification. These borrowers can expect to receive full discharge relief within the coming weeks.

Building Debt Relief  Awareness among Potentially Eligible Borrowers

ED has continued pursuing  various methods to inform borrowers that they may be eligible for borrower  defense and closed school loan discharges. These include outreach to  potentially eligible Corinthian borrowers who have not yet submitted applications  through expanded postal mail outreach, a Facebook advertisement pilot, a  servicer pilot that relies on emails, postal mail, phone calls, and texts, and  an outreach partnership with state attorneys general. On Dec. 30, 2016, the  Department published a new universal  form to facilitate future outreach and to  inform borrowers of how to apply for borrower defense relief.

The Department will soon  issue a Dear Colleague Letter addressed to privately-held Federal Family  Education Loan (FFEL) holders with guidance on how to place FFEL loans in  forbearance and halt collection activities when a borrower is seeking loan  discharge through borrower defense. This guidance streamlines the process for  suspending collection activity while the borrower's claim is being reviewed by  the Department.

Protecting  Students and Safeguarding Taxpayer Dollars

The Obama Administration has worked tirelessly to protect  students and taxpayers from fraudulent or failing higher education  institutions. Those efforts include publishing final borrower  defense regulations that protect student  borrowers from misleading and predatory practices by postsecondary institutions  and clarify a process for loan relief in cases of institutional misconduct. The  regulations also protect taxpayers by ensuring that financially troubled  institutions provide the government with protection against the risks they  create. Additionally, the landmark  Gainful Employment regulations end Federal  student aid eligibility for career colleges that are not paying off for their  students.  The recently released debt-to-earnings  rates for Gainful Employment programs build on  the Department's ongoing efforts to promote college completion and increase  accountability in the postsecondary education marketplace by setting standards  for career training programs, including programs offered by for-profit  institutions, to ensure they are serving students well.
Tags:    Student Loan ProgramsBorrower DefenseClosed School Loan DischargesPress Releases
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