The federal government is discharging $37 million in student loans for over 1,200 former students who attended the University of Phoenix.
The action applies to borrowers who enrolled in Phoenix between Sept. 21, 2012, and Dec. 31, 2014, and applied for a borrower defense loan discharge, a legal ground borrowers can take against a school that engaged in misconduct related to the loan or the educational services it provided.
These borrowers will receive emails from the Department of Education by early October and no further action is needed. Any payments already made to the department on related federal student loans will be refunded.
Borrowers who attended Phoenix but did not file a borrower’s defense discharge will need to complete an application on the Federal Student Aid website.
This discharge comes after the department reviewed evidence obtained by the Federal Trade Commission (FTC) in its investigation into Phoenix that resulted in a $191 million settlement in 2019.
“The University of Phoenix brazenly deceived prospective students with false ads to get them to enroll,” Richard Cordray, chief operating officer at Federal Student Aid, said in a statement. “Students who trusted the school and wanted to better their lives through education ended up with mounds of debt and useless degrees. Today’s announcement builds on the FTC’s work to provide relief to those affected by Phoenix’s misconduct and delivers on the Biden-Harris administration’s mission to support student loan borrowers.”
As of Wednesday, the Biden administration has discharged more than $117 billion, which includes $14.8 billion for 1.1 million borrowers whose colleges took advantage of them or closed abruptly.
The “closed school loan discharge” and “borrower loan defense discharge” programs allow borrowers to apply to get their student debt discharged if their school closes while enrolled or if the school misled students.
In the latest action, the department found that Phoenix “brazenly deceived” borrowers with a national ad campaign “falsely representing that its partnerships with thousands of corporations, including Fortune 500 companies, would benefit students by, for example, giving them hiring preferences at those companies,” the department said in a press release.
For instance, Phoenix did not have partnerships with companies nor did its relationship with corporate partners result in any benefits to students. Corporate partners simply allowed Phoenix to display their logos in a career database portal, when all the jobs posted were available to the general public, not uniquely to Phoenix students.
Although management at Phoenix was aware that the corporate relationships did not exist, a senior vice president described one of the advertisements as “smoke & mirrors.” Phoenix continued to advertise its “connection” and “partnership” with corporate employers until December 2014, the department said.
The Department of Education is seeking to recoup costs for the borrower’s defense discharge and repayment of the liabilities associated with these approved claims at a later date from the University of Phoenix.
“We respectfully, but adamantly disagree with the U.S. Department of Education’s allegations related to the Dec. 2019 University of Phoenix settlement with the Federal Trade Commission (FTC),” a University of Phoenix spokesperson told Yahoo Finance. “The claims made by the FTC and the Dept. of Ed were never tested in court. We stand behind our statement from Dec. of 2019 in which we admitted no wrongdoing in the Let’s Get Back to Work campaign, a single campaign that ran from late 2012 to early 2014. We encourage review of our statement and the ads on a University of Phoenix microsite.”
“Students deceived by the University of Phoenix deserve strong relief, and today’s action is an important step forward,” Samuel Levine, director of FTC’s Bureau of Consumer Protection, said. “We will continue to work with our state and federal partners to protect students.”
Borrowers who believe they were defrauded can apply for a borrower’s defense discharge on the Federal Student Aid website.
Read more: Student loan issues? Here’s how to file a complaint with the Department of Education
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda.
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