The move comes after investigations revealed that the college had misled students about potential salaries and job prospects.
The U.S. Education Department has made a landmark decision to discharge $130 million in federal student loans for 7,400 borrowers who attended the now-defunct for-profit college, CollegeAmerica, in Colorado
CollegeAmerica, which was part of the Center for Excellence in Higher Education (CEHE), had been under scrutiny for years, facing allegations of widespread misrepresentations to students. The loan discharges are some of the first borrower defense claims to be approved under new rules that make it easier for students defrauded by colleges to seek relief.
The Center for Excellence in Higher Education was a nonprofit that operated several for-profit colleges, including CollegeAmerica, which ceased enrolling new students in 2019 and closed in September 2020.
The Education Department’s decision means a fresh start for thousands of students affected by CollegeAmerica’s misconduct. The college had falsely advertised high graduate salaries and a job placement rate of 70%, despite actual figures being much lower. Students who graduated from CollegeAmerica’s Colorado campuses found their average earnings after five years to be only $25,000, significantly lower than the promised figures.
President Biden praised the department’s action, emphasizing that these borrowers were deceived and burdened with extensive debts
The Colorado attorney general had been investigating CollegeAmerica and its parent company for a decade before suing the institution in 2014. The affected borrowers will receive notifications about the loan discharges in August, and the department plans to refund any payments made by these students.
While this decision marks a significant step towards addressing the harm caused by predatory institutions, senior department officials suggest that more relief actions could be on the horizon as they continue to investigate other cases.
The department has also suspended the CEO of CEHE from participating in federal transactions, and it remains uncertain if the money to repay the discharged loans will be recouped. Colorado’s attorney general lauded the department’s decision, stating that CollegeAmerica’s false claims had caused untold harm to vulnerable individuals, leading them into cycles of indebtedness.
In light of this outcome, the department aims to implement stronger safeguards against malfeasance or institutional failures in the future, ensuring better protection for students and taxpayers alike.