Students who attended Colorado campuses of CollegeAmerica will get millions of dollars in loans forgiven because of widespread deceptive practices of the now-shuttered institution.
The announcement by state and federal officials is the culmination of a decade-long investigation, trial and ruling to deliver relief to thousands of student borrowers who were promised salaries and jobs they didn’t get.
The loan discharge totals $130 million. That means 7,400 students who enrolled at the Colorado campuses between 2006 and 2020 won’t have to pay the remainder of their federal loans. They also will be refunded for federal loans already paid. The discharge doesn’t cover any private loans.
“This announcement means a clean slate for thousands of students hurt by CollegeAmerica’s widespread misconduct,” said the U.S. Department of Education’s federal student aid chief Richard Cordray.
He credited Colorado Attorney General Phil Weiser whose office began investigating the institution in 2012, which led to a court ruling in favor of the state in 2020.
“Their hard work produced hundreds of valuable exhibits, including testimony from experts [and] former students.”
CollegeAmerica campuses, which operated several brick-and-mortar campuses in the state, stopped enrolling new students in 2019 and had closed all campuses by 2021.
The federal government will begin relieving students of their debt next month. Students don’t need to take any action to receive their loan discharges.
Widespread misrepresentation
The federal Department of Education found that 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 that it offered.
“Nothing can replace the time these students spent, the years that have passed and their trust that was broken,” Cordray said. “But what we can do, we will do to try to make things right.”
CollegeAmerica advertised starting salaries could be twice as much as what workers actually got.
Internal CEHE data showed that five years out of school, graduates earned on average just $25,000 a year, less than the salaries of high school graduates publicized by the school. As a result, three years after a student left college, only 16 percent were able to pay back the principal on their loans.
The rest were “mired in what for them would be a deep hole and a cycle of indebtedness,” said Weiser.
“All the while CollegeAmerica was cashing checks and profiting. Profiting off thousands of Coloradans who took on this life-altering debt because they actually believed what they were being told.”
The investigation found that while the institution advertised a job placement rate of 70 percent, internal figures showed the number was actually 40 percent.
“Successful placements” included counting a business administration graduate working as a produce clerk and a medical specialties graduate working as a waiter, officials reported.
“CollegeAmerica … took advantage of people and preyed on vulnerable individuals,” said Weiser. “They had tens of thousands of TV commercials, radio commercials, mailers, all of which promoted starting salaries or median starting salaries that they claimed their degrees would give people access to. That was fundamentally untrue.”
Officials said the institution also lied to students about offering certain programs or that a program would qualify a student for a job in a certain field. For example, it claimed that a medical specialties program would allow students to obtain the certifications to become an X-ray technician, though the school did not even own any X-ray machines.
Other student loan action
The Biden administration is moving swiftly on relieving student loan debt where it can after the U.S. Supreme Court blocked its plan to cancel federal student loan debt for millions of borrowers. It would have canceled up to $20,000 in federal student loan debt per borrower.
The CollegeAmerica issue is separate from a class action lawsuit Sweet vs. Cardona, in which borrowers alleging they were defrauded by colleges asked to have their debts canceled. In February, a judge ruled that the U.S. Department of Education could begin distributing settlement relief to students.
Those student claims — called “borrower defense to repayment” — mean a student has a legal right to discharge federal loans if they were defrauded by the colleges they attended. A senior federal education department official described the CollegeAmerica decision as the discharge of loans that are not legally enforceable.
The Biden Administration has approved $14.7 billion in relief for 1.1 million borrowers whose colleges took advantage of them or closed abruptly. This includes student borrowers who attended Corinthian Colleges and ITT Technical Institute.
Cordray said to “stay tuned” for other announcements on students who borrowed from fraudulent institutions.
If students believe they attended a college that misled them or violated certain laws, they’re encouraged to follow the steps on this federal website.
