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Raoul calls on U.S. Department of Education to discharge Federal Student Loans

Raoul Seeks Relief for Illinois Institute of Art students who were misled on accreditation; demands response on previous discharge applications for Westwood and Everest

Attorney General Kwame Raoul recently sent two letters to U.S. Department of Education Secretary Betsy DeVos seeking the discharge of federal student loans in cases where students were defrauded by their schools, Illinois Institute of Art, Everest College and Westwood College.

“Evidence of fraud in these cases is overwhelming,” Raoul said. “Deserving students, through no fault of their own, have been unfairly burdened with overwhelming debt loads. I urge the Department of Education to take action to right these wrongs and discharge the loans of thousands of Illinois students who were misled and defrauded by their schools.”

The first letter, written with Colorado Attorney General Phil Weiser, seeks discharge of federal student loans for students who attended Illinois Institute of Art and Art Institute of Colorado in 2018.  Both campuses lost accreditation, but misled students for six months that their campuses were still institutionally accredited. After Dream Center Education Holdings (DCEH), the schools’ parent company, disclosed the lack of accreditation, both schools announced plans to close at the end of the calendar year, leaving students with limited options.

The affected students were deceived into purchasing credits that could not be used. The students were not able to use credits earned in the spring of 2018 to complete their degrees because the campuses were closing. Similarly, they were unable to transfer credits to any other school because Illinois Institute of Art and Art Institute of Colorado were unaccredited. Attorney General Raoul is asking that loans used to pay for any credits after January 1, 2018, be discharged and any amounts paid on these loans to be refunded pursuant to the federal borrower defense to repayment regulations.

The second letter sent by Raoul calls for the U.S. Department of Education to respond to applications that the Illinois Attorney General’s office made to discharge federal student loans for over 10,000 Illinois borrowers who attended Everest College and Westwood College. A recent federal court decision requires the department to respond to group discharge applications made by state attorneys general. Despite receiving the Westwood and Everest student loan discharge applications over two years ago, the department has failed to acknowledge receipt or render decisions, adding to a backlog of over 150,000 borrower defense to repayment applications that the department is not processing. The department has already made findings of fraud against Corinthian Colleges, Everest’s parent company, but has not discharged the loans obtained through fraud.

The Illinois Attorney General’s office has long been a national leader in investigating and enforcing consumer protection violations in the higher education field. Recently, Attorney General Raoul has overseen the rollout of the state’s first Student Loan Ombudsman, a position created by the Student Loan Servicing Rights Act, to provide a resource for student borrowers struggling with student loan payments.

Attorney General Raoul has also advocated for protections for veterans in higher education as part of a coalition of state attorneys general. In May 2019, Raoul called on the U.S. Department of Education to automatically discharge student loans for totally and permanently disabled veterans. In April 2019, Raoul and members of the coalition called on the U.S. House Education and Labor and Veterans Affairs Committees to increase protections for veterans, who are often targets of for-profit schools.

In 2017, the office filed a lawsuit against Navient, one of the nation’s largest student loan servicers, after an investigation revealed widespread abuses of student loan borrowers. The office’s consent judgment with Education Management Corporation (EDMC), the former parent company of the Illinois Institute of Art, enabled the revelation of, and investigation into, that school’s loss of accreditation. Information obtained through that investigation led to this latest application for discharge of federal student loans for former Illinois Institute of Art students.

Student borrowers who have questions, or are in need of assistance, can call the Attorney General’s Student Loan Helpline at 1-800-455-2456. Borrowers can file complaints against their student loan servicer at the Illinois Attorney General’s website.

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