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Feds Cancel Loans for 1,500 Former Dream Center Students

November 11, 2019
 
 

The U.S. Department of Education on Friday said it was canceling 4,000 student loans taken out by roughly 1,500 students who last year attended the Art Institute of Colorado or the Illinois Institute of Art. The two former for-profit institutions were part of the messy unwinding of Dream Center Education Holdings, a nonprofit owned by a religious missionary organization that in 2017 purchased those and other institutions from Education Management Corporation. Dream Center shut down earlier this year.

An inquiry led by Representative Bobby Scott, the Virginia Democrat and House education committee chairman, had questioned whether the department properly scrutinized the nonprofit status of the Art Institute of Colorado or the Illinois Institute of Art. The two institutions continued to receive federal aid last year after they lost approval from the Higher Learning Commission, a regional accreditor. The department can authorize federal aid funds for colleges that are candidates for accreditation, but not if they are for-profits.

Scott said $10.7 million in federal aid flowed to the two campuses in 2018 before federal officials raised warnings about the eligibility issue.

A lawsuit filed last month by five former Dream Center students who were represented by the Student Legal Defense Network argued the department illegally propped up the two campuses and that loans taken out by students at those two institutions after January 2018 should be canceled.

The department has said it was acting in the best interests of Dream Center students. In addition to having their debt canceled, the department on Friday said the 1,500 former students would have their federal Pell Grant eligibility restored. The feds also are extending the period of eligibility for students who attended 24 other Dream Center institutions to have their loans canceled through a closed-school discharge.

"The department is committed to holding institutions and accreditors accountable to the students they serve," Betsy DeVos, the education secretary, said in a written statement. "In this instance, students were failed and deserve to be made whole. By canceling these students' loans and restoring their Pell eligibility, as well as extending the closed school discharge period, we hope that these impacted students will now have the tools and resources they need to complete their education."

In addition, the department said a "newly developed and improperly defined" policy from the HLC led to the misclassification of the two campuses.

However, a spokesman for the accrediting agency told The Washington Post that the policy in question had been in place for a decade. And the commission said Dream Center failed to notify students of the two institutions' downgraded status.

“The institutions did not appropriately inform their students as was required and specifically instructed by” the commission, he told the newspaper.

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