Nessel Fights to Help Cheated Students with Federal Debt Forgiveness

Contact: Kelly Rossman-McKinney 517-335-7666
Agency: Attorney General

February 6, 2020

LANSING – Michigan Attorney General Dana Nessel has joined several other attorneys general in pressuring the U.S. Department of Education and Secretary Betsy DeVos on two fronts to make decisions that would benefit indebted students who were financially impacted by the misconduct of for-profit schools.

Late last month, Nessel joined 19 other attorneys general in a letter to Congress commending lawmakers’ efforts to reject the 2019 Borrower Defense Rule proposed by the Department of Education, which removes financial responsibilities for predatory for-profit schools and would make it more difficult for defrauded students to absolve their debt.

Meanwhile, earlier this week, Nessel and a coalition of 25 other attorneys general sent a letter to DeVos urging the Secretary to use her authority to forgive the federal student loans for all who were enrolled in the now-closed schools operated by Dream Center Education Holding LLC.

Borrower Defense Rule

The new 2019 Borrower Defense Rule proposed by the Department of Education would replace the 2016 rule, which gave defrauded borrowers a transparent process to seek debt relief and protected taxpayers by holding accountable schools that engage in misconduct.

Twenty attorneys general – including Nessel – noted that the new rule would provide no realistic prospect for borrowers to discharge their loans when they have been defrauded by predatory for-profit schools, and it would eliminate financial responsibility requirements for those same institutions.

“For-profit schools that defraud their students must be held accountable and this final rule risks letting those schools off the hook with difficult and unnecessary barriers for student borrowers,” Nessel said. “My colleagues and I are calling on the Department of Education to do right by student borrowers who were robbed of both their money and the opportunity to expand their education.”

In submitting this letter, Nessel joins the attorneys general of California, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Vermont, Virginia, Washington in submitting this comment letter.

Dream Center Schools

Dream Center is a California-based nonprofit that went into receivership in January 2019.

Under the federal closed-school discharge regulation, former students may be eligible for 100 percent forgiveness of their federal student loans if they were unable to complete their programs because their school closed.

Closed-school discharge is only allowed 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, unless the Secretary of Education approves a longer period.

After Nessel and a coalition of attorneys general sent a letter to DeVos in October 2019 calling for an expansion to the number of students eligible for closed-student discharge, DeVos responded the following month by extending that opportunity to only a small number of students who weren’t previously eligible. This included students who attended The Arts Institute of Michigan, located in Troy and Novi, which closed its doors in late 2018.

“Secretary DeVos has taken steps to ensure federal loan forgiveness for some students who were left degreeless and in debt after the abrupt closure of several Dream Center schools,” Nessel said. “However, my colleagues and I urge her to allow all students to benefit from closed-school discharge, not just those who fit a select time frame."

In a letter sent Tuesday, Nessel and a separate bipartisan coalition of 25 attorneys general urge DeVos to grant debt relief to all Dream Center students unfairly strapped with debt. The coalition outlined the for-profit school’s misconduct and mismanagement that prevented students from obtaining degrees and unfairly left them to repay federal student loan debt they incurred to attend the schools that ultimately closed.

In signing Tuesday’s letter, Nessel was joined by the attorneys general of California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Vermont, Virginia, Washington and Wisconsin.

Investigations and enforcement actions by attorneys general have revealed the misconduct of numerous for-profit schools and helped secure relief for tens of thousands of student borrowers.

Nessel’s office has fought for and secured relief for student borrowers from failed for-profit schools including ITT Technical Institute, Art Institute of Michigan, and Career Education Corp.

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