Dive Brief:
- The U.S. Department of Education will forgive $130 million in student loan debt for some borrowers who attended the Colorado locations of CollegeAmerica, a closed chain of private institutions.
- The cancellation will benefit about 7,400 students who enrolled in CollegeAmerica between January 2006 and July 2020, the Education Department announced Tuesday. Agency officials said CollegeAmerica’s parent company — the shuttered Center for Excellence in Higher Education, or CEHE — misled students about salary and job prospects post graduation, its academic programs, and the terms of a private loan it offered.
- Borrowers will be notified in August about the discharge, which will occur automatically. Any payments those borrowers made to the Education Department will be refunded.
Dive Insight:
The Biden administration has prioritized loan cancellation, particularly for borrowers who attended colleges accused of misrepresenting their student outcomes and degree offerings. Most of these have been for-profit institutions, leading the sector to complain the White House has targeted them.
CollegeAmerica was at one point a for-profit institution, with locations in Arizona and Colorado.
However, in 2018, CEHE reached a deal with the Trump-era Education Department to transform CollegeAmerica and its other institutions into nonprofits. CEHE had sued the Obama administration over its refusal to transition its colleges to nonprofit status.
Before and after the conversion deal, CEHE and its colleges faced allegations they were running poor-quality programs that left students saddled with debt and few career possibilities. The Colorado campuses stopped enrolling new students in 2019 and closed by September 2020, according to the Education Department.
The department’s new decision to forgive loans was based on an investigation the Colorado Attorney General's office started over a decade ago.
That office looked into CEHE’s practices in the state and sued in 2014, alleging violations of consumer protection law.
Though the state partially prevailed in the lawsuit in 2020, and CEHE was fined $3 million, Colorado's highest court this year ordered the case to be reconsidered.
Still, the state’s lawsuit provided the federal Education Department with enough ammo to go after CEHE.
Colorado gave the department CEHE’s “internal policies, procedures, and emails,” and the federal officials reviewed testimony from experts, former students and CEHE officials during the case.
Only students who attended one of CollegeAmerica’s Colorado campuses will benefit from the discharge, state and federal officials said during a call with reporters Tuesday.
A senior department official did not address whether the Education Department will try to recoup the money through CEHE executives. But the official noted noted that CEHE’s acting CEO, Eric Juhlin, has been suspended from participating in federal contracting since 2021.
CEHE’s founder, Carl Barney, no longer owns institutions that are participating in the federal student aid program, the official said.
CEHE shut down all of its colleges in 2021, but it’s still scuffling with the Education Department.
In December, it sued the department over those closures, accusing it of withholding millions of dollars in federal funding. CEHE is seeking $500 million in damages.
To date, the Biden administration has approved roughly $116 billion in loan discharges through various federal programs. However, the president’s signature loan forgiveness policy — which would have wiped away up to $20,000 in debt for some borrowers — was ruled unlawful in June by the U.S. Supreme Court.
