Nessel to Sec. DeVos: Extend Closed School Discharge Time Frame for Students of Dream Center Education Holdings Schools

Contact: Dan Olsen 517-335-7666
Agency: Attorney General

October 18, 2019

LANSING — Working to ensure federal debt forgiveness for Michigan students that were left in debt with no degree after the Art Institute of Michigan’s (Ai) sudden closure, Attorney General Dana Nessel Thursday joined a bipartisan group of 30 Attorneys General urging U.S. Secretary of Education Betsy DeVos to exercise her authority in extending the closed school discharge time frame for affected students.

In their letter, the Attorneys General cite extraordinary misconduct and mismanagement by Ai’s parent company, Dream Center Education Holdings, LLC (DCEH), as justification for extending the school discharge time frame. DECH prevented students from obtaining degrees, and unfairly left them to repay federal student loan debt from their time attending the failed schools.

The closed school discharge time frame provides for a 100 percent discharge of federal student loan debt for students who were enrolled when the school closed, were on an approved leave of absence when the school closed, or withdrew within 120 days of the school’s closure.

“The students impacted by the deceitful actions of Dream Center Education Holdings shouldn’t have to spend years in debt for a degree they were promised and never received,” Nessel said. “We’re counting on the Secretary of Education to do the right thing and ensure that all students impacted by the abrupt closure of these schools – here in Michigan and across the country – are able to seek relief.”   

The Attorneys General write in the letter that a “wide variety of regulators, including the U.S. Department of Education have found that DCEH violated numerous federal and state laws, was noncompliant with accreditors and grossly mismanaged its schools — including Argosy University, Ai, and South University — leading to the schools’ recent closures. These closures prevented students from completing their programs of study, leaving borrowers with substantial student loan debt and nothing to show for it.”

The letter details the myriad of ways in which DCEH violated federal and state law, and grossly mismanaged the schools, which led to the schools’ rapid closures in less than 18 months after DCEH acquired the entities.

Two egregious examples include:

  1. DCEH failed to inform students that the two of its schools lost their accreditation for several months — during which time students registered for additional terms and incurred additional debts, for credits that could not be used.
  2. DCEH failed to distribute over $16 million in federal loan credit balance refunds to students. These were student loan stipends that often used for food and housing expenses.

The Arts Institute of Michigan closed their doors in late 2018. At the time, roughly 300 students were enrolled in the school’s Troy, Michigan campus.

Joining Attorney General Nessel in signing the letter were the Attorneys General of California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington and Wisconsin.

A copy of the letter can be read here.

###