The Biden administration will cancel $130 million in federal student loans for 7,400 borrowers who attended a now-defunct college in Colorado, the Education Department said on Tuesday.
The cancellation applies to borrowers who attended Colorado-based locations of CollegeAmerica between Jan. 1, 2006, and July 1, 2020, according to the agency. The discharge only applies to federal student loans, not private loans or commercial FFEL loans.
The department’s new decision to forgive loans was based on evidence gathered by the Colorado attorney general’s office that found CollegeAmerica’s parent company–the Center for Excellence in Higher Education (CEHE)–made widespread misrepresentations about the salaries and employment rates of its graduates, the programs it offered, and the terms of a private loan product that it was offering.
President Joe Biden said in a statement that borrowers at CollegeAmerica “were lied to, ripped off, and saddled with mountains of debt.”
CollegeAmerica was at one point a for-profit institution, with locations in Arizona and Colorado.
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.
“Today’s announcement shows how different parts of government can work together to deliver relief to those who’ve been taken advantage of,” said Richard Cordray, who heads the Federal Student Aid office at the department.
The move is the latest effort from the Biden administration to provide relief to borrowers who attended colleges accused of misrepresenting their student outcome and degree offerings.
“CollegeAmerica knowingly took advantage of students by luring them into high-priced, low-quality programs with promises of high-earning potential and job placement that it knew were not attainable,” Colorado Attorney General Phil Weiser said in a statement. “Protecting borrowers from predatory lending and helping Coloradans navigate through student loan burdens will continue to be a priority for our office.”
Mr. Weiser’s investigation found that Colorado CollegeAmerica campus graduates on average earned just $25,000 five years out of school, less than the salaries of high school graduates publicized by the school, the press release stated.
CEHE were also found to inflate and falsify job placement rates. Furthermore, CEHE told borrowers that its private loan product was affordable when it knew that 70 percent of Colorado CollegeAmerica borrowers had defaulted on their loans.
CollegeAmerica campuses in Colorado stopped new enrollments in 2019, closed by September 2020, and closed all its remaining campuses in August 2021, according to the press release.
To date, the Biden administration has approved $116 billion in loan forgiveness through various federal programs to over 3.4 million Americans. Of those borrowers, 1.1 million attended colleges that defrauded them or abruptly closed, according to the White House.
Mr. Biden has made addressing mounting U.S. student debt a top priority since taking office in January 2021, including by pursuing a plan to provide $430 billion in loan relief. However, the Supreme Court blocked that plan in a June 30 ruling. Biden has vowed to pursue the relief through new measures.
Earlier this month, the Biden administration announced that it would be canceling more than $30 billion in student loans for 800,000 borrowers under the existing income-driven repayment program.
