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Illinois Attorney General Kwame Raoul
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November 13, 2019

ATTORNEY GENERAL RAOUL ANNOUNCES DEPARTMENT OF EDUCATION WILL DISCHARGE AT LEAST $10 MILLION IN FEDERAL STUDENT LOANS

Raoul Calls for Increased Transparency and Refunds for Defrauded Students

Chicago — Attorney General Kwame Raoul today announced that nearly 1,000 former Illinois Institute of Art students will have their federal student loans discharged at the request of Raoul and Colorado Attorney General Phil Weiser. Raoul and Weiser sent a group discharge application in June to the U.S. Department of Education (DOE) seeking the discharge of millions of dollars in federal student loans for students who attended the Illinois Institute of Art and Art Institute of Colorado, citing overwhelming evidence of fraud. In particular, the Illinois Institute of Art and Art Institute of Colorado misrepresented to students for six months that the schools were still accredited when they had lost accreditation.

“I am pleased that millions of dollars in relief will be returned to the hard working students of Illinois,” Raoul said. “The Department of Education, however, is unfairly limiting relief that should be available to these students who took out loans to pay for a school that misled them to believe it was still accredited and is now closed.

Although the DOE will discharge at least $10 million in student loans for students who attended the Illinois and Colorado campuses, Raoul is calling for more transparency regarding the scope of relief available to students, arguing that the DOE appears to be unfairly limiting discharge options for students. The DOE will discharge the loans used to pay for periods from January 2018 until the campuses closed in December 2018, but the DOE has not said that it will issue refunds for amounts that students paid on those loans. Furthermore, the DOE’s failure to extend the closed school discharge date beyond June 29, 2018 means that many defrauded students were denied the opportunity to discharge their student loans used to pay for periods prior to January 2018.

Attorney General Raoul’s group discharge application, joined by Colorado Attorney General Weiser, sought the discharge of federal student loans and refunds of any amounts paid on the loans for students who attended Illinois Institute of Art and Art Institute of Colorado in 2018. The application requested that the DOE use its discretion to extend the closed school discharge date so that students harmed by the misrepresentations could discharge all loans used to attend the offending schools. The Illinois and Colorado campuses lost accreditation, but misled students for six months, portraying their campuses as still being 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 to complete their educations and massive debt loans.

In October, Raoul and 29 other state attorneys general called on the DOE to expand the closed school discharge window for all students attending all DCEH schools, including Argosy University campuses in Illinois. In a letter to the DOE, Raoul cataloged the myriad of ways in which DCEH violated federal and state law, and grossly mismanaged the schools. The violations, including the failure to distribute $16 million in federal student loan credit balance refunds to students, led to the schools’ rapid closures in less than 18 months after DCEH acquired the entities. Rather than providing all these students the opportunity to discharge their loans pursuant to closed school discharge, the DOE only extended the date to June 29, 2018, leaving many students nationwide ineligible to seek closed school discharge.

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 resources for student borrowers who are struggling to make student loan payments. Attorney General Raoul has also advocated for protections for veterans in higher education, joining a coalition of state attorneys general calling on the DOE in May to automatically discharge student loans for totally and permanently disabled veterans. In August of 2019, the DOE was ordered to create a process to automatically discharge the loans.

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 also file complaints on the Attorney General’s website.

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