Clarification: This story was updated with additional details from the Education Department on the recoupment process.
The U.S. Department of Education plans to discharge $72 million in student loans for borrowers who attended Ashford University — and the University of Arizona may end up on the hook for some of the cost.
Education Department officials announced Wednesday they were clearing the debt of over 2,300 former Ashford students through the borrower defense to repayment regulation, which allows students to have their loans wiped away if their colleges misled them.
The agency based its decision on a successful lawsuit brought against Ashford and its former parent company, Zovio, that accused the online for-profit college of misrepresenting the cost and career outcomes of its programs. In 2022, a California court ruled against the university and fined Zovio $22 million in civil penalties. The company took steps to wind down operations later that year.
While the lawsuit was still underway, however, Ashford University changed hands in late 2020 through a complicated deal that affiliated it with the University of Arizona and rebranded the online college as the University of Arizona Global Campus, or UAGC. In June of this year, the University of Arizona directly acquired UAGC.
The Education Department suggested Wednesday that the University of Arizona could end up being asked for at least some of the recoupment amount.
“We will seek to recoup the funds from the current owner, as well as anything we can get out of Zovio,” said a senior Education Department official who spoke on background during a call with reporters.
The recoupment process would begin with a request for payment sent to UAGC, an Education Department official said via email Wednesday evening.
“If that is established ultimately as a liability, then UAGC would be responsible for those funds,” the official said.
If UAGC cannot pay the amount, the University of Arizona may be responsible. The department has not yet started the recoupment process with UAGC.
When an institution acquires another college, “they agree to accept the liabilities from the school they’re acquiring,” the senior department official said during Wednesday’s call.
The announcement comes two months after University of Arizona completed the direct acquisition of UAGC and over a year after it first signed a contract making it jointly liable for any of the online college’s federal financial aid liabilities.
It’s unclear how much money the Education Department will seek.
“I can’t speak to the exact dollar amount,” the official said during the call, citing factors like differences in loan ages.
The University of Arizona did not immediately answer questions Wednesday about the announcement.
‘High-pressure and deceptive recruiting tactics’
The debt relief will cover former students who attended Ashford between March 1, 2009, and April 30, 2020, and filed borrower defense claims against the institution. The Education Department plans to send emails next month approving their claims.
The lawsuit covered the same period. When California state Judge Eddie Sturgeon ruled against Ashford, he cited evidence estimating that Zovio had made roughly 1.2 million misleading calls to prospective students during that time frame.
His ruling detailed an environment at Zovio where admissions counselors felt pressured to misrepresent programs to meet their quotas. According to court documents, they were expected to call hundreds of students each day and threatened with termination if they didn’t hit enrollment targets.
“As the California Department of Justice proved in court, Ashford relied extensively on high-pressure and deceptive recruiting tactics to lure students,” U.S. Under Secretary of Education James Kvaal said in a Wednesday statement. “Today we are protecting the students who were cheated by Ashford, and we will also hold the perpetrators accountable, protect taxpayers, and deter future wrongdoing.”
The Education Department also announced that it would examine whether Ashford’s management broke federal laws and regulations, and “may pursue appropriate remedies” if evidence shows that they did.
Are legal troubles ahead?
The Education Department touted that it has aggressively been canceling the loans of borrowers who say they were misled by their colleges or whose institutions closed suddenly. And the University of Arizona isn't the only target for recoupment.
In 2022, the Education Department told DeVry University, a for-profit college, that it intended to recoup over $23 million to pay for the discharged debt of 649 borrowers who say they were defrauded.
Later that year, DeVry sued the department, arguing that the department denied the university its due process rights. And in June, DeVry asked a federal judge to temporarily block the department from recouping the funds.
Meanwhile, the Education Department is facing other legal action over borrower defense. Earlier this month, an appeals court temporarily blocked the Biden administration’s new rules governing both that program and closed-school loan discharges, which had originally taken effect in July.
A senior department official said Wednesday that the Education Department was issuing the $72 million in relief under previous versions of the borrower defense regulations.
