In a pair of aggressive moves targeting for-profit college chains, the Education Department on Tuesday wiped out about $4 billion in debts owed by students who attended ITT Technical Institute schools and sought to recoup $24 million from DeVry University.
The moves are part of the department’s efforts to crack down on the for-profit education sector and help students who have been defrauded.
The agency said that it would automatically discharge all remaining federal loans for 208,000 borrowers who attended ITT Technical Institute schools from 2005 until the chain’s collapse in 2016.
It is the second time that President Biden’s administration has automatically eliminated the debts of defrauded students, after a similar move in June that forgave nearly $6 billion owed by more than 500,000 former students at Corinthian Colleges, another large for-profit chain that imploded.
“In recent years, too many for-profit colleges and career schools have been caught defrauding and deceiving their students,” the education secretary, Miguel A. Cardona, said. “Their entire business model relied on driving students deep into debt, and then they laughed their way right to the bank.”
Both ITT and Corinthian went bankrupt years ago, leaving taxpayers on the hook for the debts now being forgiven for the schools’ former students.
“We do think it’s really important for, especially, individual officials and leaders of these schools to take responsibility for the failures of those schools,” said Richard Cordray, the chief operating officer of the Education Department’s Federal Student Aid office. “That is not how things worked in the past, and it’s one of the improvements we’re trying to make.”
The actions come as Mr. Biden faces an imminent decision about whether to extend the federal student loan payment pause that began more than two years ago, in March 2020. Payments are scheduled to restart in September, but loans servicers — who have been told by the government to hold off on sending out bills — expect Mr. Biden to extend the pause again, likely until 2023.
On the presidential campaign trail, Mr. Biden pledged to forgive $10,000 in student debt per borrower — a promise he has not yet fulfilled. His administration has so far focused on targeted actions that have eliminated $32 billion in loans for public service workers, permanently disabled borrowers, defrauded students and people whose schools abruptly closed while they were enrolled.
The Education Department sent a claim this week to DeVry University, once one of the nation’s largest for-profit college chains, seeking $24 million to cover the costs of discharging its former students’ loans.
The chain so badly misled its students that Education Department officials agreed this year to cancel the federal student loans of at least 1,800 of its former attendees. The action on Tuesday is aimed at “recouping money for taxpayers, which is certainly always a goal for us,” Mr. Cordray said.
DeVry was the first — and so far, only — still-operating school at which the Education Department has approved claims through a relief system known as “borrower defense to repayment.” The program lets borrowers who attended schools that broke consumer protection laws seek to have their federal loan debts wiped out.
From 2008 to 2015, DeVry fraudulently lured in applicants with vastly inflated claims about their career prospects, the Education Department said. The school advertised that 90 percent of its graduates who actively sought work landed jobs in their fields within six months, but its actual placement rate was around 58 percent, agency officials said.
During that period DeVry was owned by Adtalem Global Education, which runs for-profit trade schools. Adtalem sold the school in 2018 to Cogswell Capital, an investment firm owned by the venture capitalist and financier Bradley Palmer. The department is pursuing Cogswell, the current owner, for payment, officials said.
“We are in receipt of the notice from the Department and are reviewing it,” said Hessy Fernandez, DeVry’s public relations director. “We continue to believe the department mischaracterizes DeVry’s calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached.”
Mr. Palmer did not respond to requests for comment.
DeVry has 20 days to file an appeal if it wishes to contest the agency’s recoupment request, Education Department officials said.