7,400 student-loan borrowers hurt by a school's 'widespread misconduct' are getting $130 million in debt wiped out, Biden's Education Department says

• The Education Department announced it will be wiping out $130 million in student debt for 7,400 borrowers.
• It impacts borrowers who attended Colorado-based campuses of CollegeAmerica between 2006 and 2020.

Thousands of student-loan borrowers are receiving automatic debt relief after President Joe Biden's Education Department accused their school of wrongdoing.

On Tuesday, the Education Department announced it will deliver $130 million in debt cancellation to 7,400 students who were enrolled at Colorado-based locations of CollegeAmerica between January 1, 2006 and July 1, 2020.

CollegeAmerica is a group operated by the Center for Excellence in Higher Education, a nonprofit that closed in 2021 and managed a number of schools in the US. The department said in its press release that the company "made widespread misrepresentations about the salaries and employment rates of its graduates, the programs it offered, and the terms of a private loan product it offered."

"This announcement means a clean slate for thousands of students hurt by CollegeAmerica's widespread misconduct," Federal Student Aid Chief Richard Cordray said in a statement. In 2012, the Colorado Attorney General began investigating the company's practices, and it led to a bench trial in 2017 in which the judge ruled in 2020 that CEHE had violated consumer protection laws. The state's investigation provided the basis for the departments findings that led to Tuesday's group discharge, including:

• CollegeAmerica Colorado campuses "advertised inflated and falsified job placement rates of 70 percent, when internal figures showed the actual number was 40 percent"
• CEHE "falsely" told students its private loan product was affordable when in prior years, as many as 70% of students who enrolled in the programs defaulted
• And CEHE "lied to students" and told them it offered certain programs or qualifications that did not exist.

"They basically tried to get people to sign up for degree programs that they knew weren't going to deliver the results that they were promising," Colorado Attorney General Philip Weiser told reporters on a Tuesday press call.

"The advertised starting salaries could be as high as twice as much as what people could actually get," he added. "And so three years after they might leave CollegeAmerica, only 16% of them were able to pay back the principal on student loans, meaning they were mired in what, for them, would be a deep hole and a cycle of indebtedness."

The department said it will begin notifying borrowers eligible for relief in August, after which those borrowers will see their remaining balances wiped out. Any payments those borrowers made to the government on debt they took out to attend a Colorado-based CollegeAmerica institution will also be refunded.

In 2022, CEHE sued the Education Department, accusing it of forcing the company to close so students would qualify for debt relief. "The Department's actions were the culmination of a playbook designed to force CEHE's precipitous closure and pave the way to impose massive closed-school discharge liabilities in the future," the lawsuit said.

Tuesday's action is the latest the Education Department has taken to approve a group discharge of borrower defense claims, which are claims borrowers can submit if they believe they were defrauded by the school they attended, and if approved, their loans would be canceled. In June 2022, for example, the department announced it would be approving a $5.8 billion group discharge for remaining borrowers that attend for-profit chain Corinthian Colleges, getting relief to over 560,000 former students.

The department said it encourages states to provide evidence of wrongdoing by other institutions to help their residents receive debt relief by submitting a group application.

"While my predecessor looked the other way when colleges defrauded students and borrowers – I promised to take this on directly, and provide borrowers with the relief they need and deserve," Biden said in a statement.

"Already under my Administration, we've approved $14.7 billion in relief for 1.1 million borrowers whose colleges took advantage of them or closed abruptly – like those students who attended CollegeAmerica in Colorado. And in total, we have approved $116 billion in debt relief for over 3.4 million Americans," he continued. "As long as I am president, we will never stop fighting to deliver relief to borrowers, hold bad actors accountable, and bring the promise of college to more Americans."