Attorney General Becerra Calls on Secretary DeVos to Discharge Student Loan Debt for Borrowers Defrauded by the Dream Center Schools
SACRAMENTO — California Attorney General Xavier Becerra, as part of a bipartisan coalition of 30 attorneys general, today called on Department of Education Secretary DeVos to exercise her authority to help student loan borrowers who were defrauded by schools operated by Dream Center Education Holding LLC (The Dream Center). The Dream Center’s schools — including Argosy University, the Art Institutes, and South University — closed in 2018, just 18 months after being acquired by the Dream Center, and after extensive fraud and mismanagement came to light. Under federal law, student loan borrowers have a right to a full discharge of their federal student loans under the federal “closed school discharge” rule if they are unable to complete their program because their school closed. The letter asks Secretary DeVos to exercise her discretion to extend the period of student eligibility for closed school discharge and to take immediate action to automatically discharge the federal student loans of these student borrowers. Affected students should not be obligated to repay federal student loans taken out for programs of study they could not complete through no fault of their own.
“The Dream Center schools created a nightmare for these students seeking a higher education,” said Attorney General Becerra. “Secretary DeVos must act quickly to review and approve relief for these students and to extend the withdrawal period to include all of the students misled by these predatory sham schools.”
Federal law provides a right to closed school discharge for students who were attending the school when it closed, or who withdrew up to 120 days before school’s closure, and who did not complete their programs of study. It also allows the Secretary of Education to extend the period of eligibility to more than 120 days before closure, where appropriate. In the letter, the attorneys general urge Secretary DeVos to exercise her authority to extend the 120-day period, given the fraud and mismanagement that occurred at these schools. The states urge Secretary DeVos to extend the closed school discharge timeframe to include any Argosy University, Art Institute, or South University student borrower who withdrew from one of the closed schools after October 17, 2017, or the day that the Dream Center took over management of the schools.
The letter discusses the myriad ways in which the Dream Center violated federal and state law and grossly mismanaged the schools, which led to the schools’ rapid closure less than 18 months after the Dream Center acquired them. Tens of thousands of student borrowers were unable to complete their programs of study because the Dream Center’s mismanagement led the schools to close. Exceptional circumstances exist which would provide for the discharge of federal student loans and the extension of the 120-day period, including adverse action by an accreditor, the institution’s discontinuation of a substantial amount of academic programming, action by states to revoke a school’s license to operate or award academic credentials, and findings by state and federal agencies that the school violated state or federal law.
Attorney General Becerra joined with the attorneys general of Minnesota, Oregon, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington and Wisconsin in filing the letter.