Ask Department of Education to Cancel Argosy/EDMC/Dream Center Student Debt

Ask Department of Education to Cancel Argosy/EDMC/Dream Center Student Debt

August 16, 2022
Signatures: 1,035Next Goal: 1,500
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Why this petition matters

Started by Ryne Zuzinec

Currently, the US Department of Education is facing a class action settlement for their severely poor handling of the Borrower Defense to Repayment. This is great for borrowers and the economy. However, the Department of Education is falling short in their duties to be monitoring and acting in accordance with their own rules to be considering the process for group discharges.

Under the 2016 Obama-Era rules, the Department proposed to...

"Amend the FFEL and Direct Loan regulations to a) specify certain circumstances in which the Department must provide group eligibility for discharge, including when there is evidence that a school has engaged in a practice of falsely certifying borrower eligibility; and (b) provide a procedure by which borrowers may use existing authority to seek group discharge eligibility determinations from the Department. "

Over the years, there has been mass cancellations of student loan debt from predatory, for-profit schools, including Corinthian College, ITT, Devry, and many others. These schools have several things in common: they were found under a court of law to have engaged in predatory practices including: misrepresentations about job placement rates, cost of attendance, accreditation, employment prospects, educational services, and more. 

Previously, the State Attorney's General of Minnesota, Arizona, Colorado, Florida, Georgia, Hawaii, Illinois, Tennessee, Utah, and Virginia asked the Department of Education under then-President Trump and the DeVos administration, and now under President Biden and the Cardona administration to cancel outstanding loans for students who attended Argosy University/EDMC/Dream Center schools. These State Attorney's Generals filed a lawsuit against Argosy University/EDMC/Dream Center citing violations of multiple state laws for consumer protection. These claims include:

  1. In a 2015 lawsuit, the Parties claimed that Argosy/EDMC/Dream Center: (a) used deceptive solicitations broadly touting educational benefits that were only available to a few students; (b) engaged in extremely high-pressure recruitment; (c) falsely claimed that programs were accredited by an accreditor necessary to obtain licensure in certain professions; and (d) misrepresented job placement and graduation rates. The settlement required EDMC to undertake compliance obligations, including making certain disclosures, prohibitions on deceptive recruiting practices, and oversight by an administrator, and also required EDMC to cancel certain institutional loan debt incurred prior to the effective date.
  2. In March 2017, EDMC announced it was in the process of selling Argosy/EDMC and other schools to Dream Center. Federal regulations required approval by the U.S. Department of Education of the change in ownership of the schools and required approval of the conversion to nonprofit status. The change in ownership also required approval by the institution’s accreditors.
  3. While the U.S. Department of Education gave tentative permission for the sale to proceed on October 17, 2017, it made clear that it did not formally approve the sale or conversion to nonprofit status, and that it would have to undertake a comprehensive review of Dream Center’s capabilities before the sale and conversion could be considered approved
  4. The U.S. Department of Education also noted that Dream Center would need to: “submit additional documentation and information to confirm the other elements of nonprofit status,” “need to establish that the Institutions’ net income does not benefit any party other than the Institutions,” and “confirm . . . that control is not concentrated in any person.

It was also noted that Argosy/EDMC/Dream Center made the following misrepresentations:

  1. In late 2017, Argosy/EDMC/Dream Center programs deemed “failing” under the U.S. Department of Education’s Gainful Employment Rule triggered Dream Center’s obligation to post Gainful Employment failure warnings, but Dream Center did not make those disclosures. The settlement administrator appointed by the states found that an Argosy/EDMC/Dream Center manager expressly instructed employees not to comply with these disclosure requirements.5 This failure was not only a violation of federal regulations to remain eligible to receive Title IV federal financial aid;6 it was also a violation of the states’ prior settlement and their UDAP laws.
  2. The settlement administrator found that, despite lacking approval to the conversion to non-profit status, Argosy/EDMC/Dream Center falsely boasted to students that it was a nonprofit educational institution. A “fact sheet” posted on Argosy’s website stated that the school was now a “nonprofit academic institution.” This again, constituted a violation of the settlement and violation of the states’ laws.
  3. On July 2, 2018, Dream Center announced closures of 30 ground campuses over email. The email did not provide dates on which the schools would close, or information regarding future options for students. Dream Center only vaguely told  students that their schools were closing, sometime. In doing so, Dream Center failed to provide students borrowers with accurate and complete information that would have been necessary to inform students of their rights and options.
  4. In late July 2018, Dream Center distributed guidance to its campus presidents, with three options Dream Center was making available for students whose schools were closing. The communications initially made to students did not include clear information about students’ ability to request discharge of their federal student loans based on the school’s closure. The failure to provide timely information about “closed school” discharge, particularly because of a 120-day default timeframe for eligibility, combined with the failure to provide information about expected or planned closure dates, was consequential. Students who chose to withdraw upon the July 2, 2018 announcement to avoid incurring further debts thought they were making a sound financial choice. Information about closed school discharge could have informed students staying enrolled longer would have been a better financial choice.
  5. Argosy/EDMC/Dream Center falsely marketed and promised to students that, if the student enrolled at the school, the school would provide them with “high quality professional education programs” and offered “doctoral, masters, post-graduate certificate and undergraduate programs” and “[p]rofessional development services.” The school stated that it was “able to serve effectively its student body and the needs of the professions served by its programs.” The school, however, did not in fact have the capability to and did not deliver an educational program to students that were enrolled during the sudden closure.

“UDAP laws” means all of the consumer protection and trade practice statutes in the Attorneys General’s states that prohibit, among other things, unfair and deceptive acts and practices. These include:

a. Minnesota: Minn. Stat. § 325F.69, subd. 1; Minn. Stat. § 325D.44, subd. 1(1)-(13); Minn. Stat. § 325D.44, subd. 1(1)-(13);

b. Arizona: Ariz. Rev. Stat. §§ 44-1521-1534;

c. Colorado: Colo. Rev. Stat. §§ 6-1-101, et seq;

d. Florida: Chapter 501, Part II, Florida Statutes (the Florida Deceptive and Unfair Trade Practices Act);

e. Georgia: Fair Business Practices Act, O.C.G.A. § 390 et seq;

f. Hawaii: Haw. Rev. Stat. Sects. 480-2 and 481A-3;

g. Illinois: Illinois Consumer Fraud and Deceptive Business Practices Act, 815

ILCS 505/1 et seq;

h. Tennessee: Tenn. Code Ann. § 47-18-101-131;

i. Utah: Utah Code 13-11-1, et seq. and

j. Virginia: Va. Code. Ann. §§ 59.1-196 to 59.1-207

In several letters, as previously mentioned, these States Attorney's General requested that the Department of Education discharge the loans of students who attended these predatory schools based on the laws described herein. There is precedent that has been set by the Department involving several other schools who ultimately shuttered their doors to be able to have their loans forgiven. It is without question that the Department has this authority. Under the 2016 Rules, the Department has the right to institute group loan discharges under the Borrower Defense to Repayment, even if a student did not submit an application. The 2016 rules lay out the following: what must a borrower show to qualify for BDTR? A loan may be discharged if a borrower shows a substantial misrepresentation by the school. 2) Are judgements against the school or breach of contract grounds for a borrower defense discharge? Yes, these are both grounds for discharge.

Under the 2016 Negotiated Rulemaking Process, the Department released the following rule changes:

  • Section 455(h) of the Higher Education Act of 1965, as amended (HEA), 20 U.S.C. 1087e(h), authorizes the Secretary to specify in regulation which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a Direct Loan
  • Those final regulations specify that a borrower may assert as a defense to repayment any “act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law.”
  • The current standard (rule in place before 2016) allows borrowers to assert a borrower defense if a cause of action would have arisen under applicable State law. In contrast, these final regulations establish a new Federal standard that will allow a borrower to assert a borrower defense on the basis of a substantial misrepresentation, a breach of contract, or a favorable, non-default contested judgment against the school, for its act or omission relating to the making of the borrower's Direct Loan or the provision of educational services for which the loan was provided. 

As several schools have had loans for students discharged en masse for similar practices as those determined by the Order signed in the settlement agreement signed off by the Minnesota State Courts. While the States Attorney's General of the states previously mentioned only asked the Department to consider the closed school discharge, the evidence was provided to the Department in the letter outlining the applicable state and federal violations. 

The relief of this debt held by Argosy/EDMC/Dream Center students would greatly address the ongoing student loan crisis faced by many students. The Department is already considering discharge of the loans for over 100 schools in the class action settlement (Sweet v Cardona; previously Sweet v. DeVos). In the settlement agreement, the Parties agreed that: "In court documents, the Ed Department argued that “attendance at one of these schools justifies presumptive relief” because of strong signs that they carried out misconduct. This alone should apply to any student who has loans outstanding with Argosy/EDMC/Dream Center University.

Please note: This applies to the following schools/subsidiaries:

  • All Argosy University Campuses
  • All Art Institutes Schools
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Signatures: 1,035Next Goal: 1,500
Support now