For Immediate Release - January 13, 2017

AG Healey Announces $30 Million in Debt Relief for Thousands of Massachusetts Students Who Attended American Career Institute

Former For-Profit School Admitted to Lying and Violating Massachusetts Law; U.S. Department of Education Takes Unprecedented Action to Cancel Student Loans

BOSTON – Nearly 4,500 students victimized by the now-defunct American Career Institute (ACI) in Massachusetts will have their federal student loans forgiven by the U.S. Department of Education, Attorney General Maura Healey announced today. The announcement marks the first time the Department has granted a state attorney general’s application to cancel loans for a group of defrauded students.

According to the Department, students who attended any of ACI’s five career training schools in Massachusetts – Braintree, Cambridge, Framingham, Springfield, and Woburn – will have their loans discharged based on deceptive and illegal practices uncovered by the AG’s investigation into the former for-profit school. In addition to federal loan discharges, former ACI students will also be entitled to refunds of any payments made on their federal loans.  The combined borrower loan discharges for ACI students announced today will total roughly $30 million.

In July, AG Healey submitted an application to the Department, calling for the immediate cancellation of loans based on the unprecedented consent judgment links to PDF file that the AG’s Office obtained against ACI, in which the school admitted to widespread violations of the Massachusetts Consumer Protection Act. 

“ACI was a predatory, for-profit school that admitted to breaking Massachusetts law and lying to its students. Today, these students are finally getting the relief they deserve,” AG Healey said. “I thank Secretary King and the Department for utilizing its authority to grant immediate group relief to our students, and the dedicated lawyers and investigators in my office for building the case against ACI. Our office will continue to help students struggling with unaffordable debt and hold predatory schools accountable for their illegal conduct.”

“Today’s announcement means 4,500 Massachusetts students who were cheated by this predatory for-profit school will finally see their student debt nightmare come to an end,” Senator Elizabeth Warren said. “AG Healey and I worked hard to secure discharges for these students based on the evidence of illegal fraud her office uncovered, and we’re going to keep fighting for loan cancellations for other defrauded students in Massachusetts and across the country.”

“Before it closed without warning, American Career Institute targeted low-income and vulnerable populations, enrolling students for the sole purpose of extracting federal student loan money,” said Toby Merrill, Director of the Project on Predatory Student Lending at The Legal Services Center of Harvard Law School. “Without Attorney General Healey’s years-long legal battle with ACI, her hard-won judgment against ACI for lying to and cheating students, and the Department of Education’s recognition that these borrowers cannot be held liable for fraudulently incurred loans, former ACI students would face a lifetime of unpayable debts incurred for a sham education. We are especially pleased that borrowers will get the borrower defense relief they deserve without the unnecessary hurdle of individual applications.”

According to the Department, student loan borrowers who used federal loans to attend ACI programs in Massachusetts will begin receiving emails on Jan. 17 from Federal Student Aid informing them that any existing federal loans incurred will be automatically discharged. Of the roughly 4,500 students who attended ACI, 650 have already received closed school discharges, because they were enrolled at the time the school closed or withdrew in the four months prior to ACI’s closure. The remaining students will receive automatic borrower defense discharges.

In 2013, the AG’s Office sued ACI for falsely promising meaningful vocational training and opportunities to its students and then failing to deliver, as well as other widespread misconduct. AG Healey’s judgment against ACI is believed to be the first time a for-profit school has admitted, in court, its predatory wrongdoing in violation of state law. The Court found that ACI knowingly overstated the employment prospects for its graduates; falsified student signatures, enrollment records, attendance records, and grades; used unlicensed and unqualified instructors; and provided valueless externships and no meaningful career placement services.

The federal loans affected by the Department’s borrower defense relief belong to nearly 4,500 students who attended ACI from January 2010 through the school’s closure in January 2013. ACI had offered various certificate programs, such as information technology and medical assisting programs, with tuition and fees that cost up to $23,000.

AG Healey has been a national leader against predatory for-profit schools and continues to work to secure relief for students. In November 2016, the AG’s Office secured $2.4 million from national loan servicer ACS for failing to properly process applications for federal repayment plans and engaging in harassing debt collection practices. AG Healey has also announced enforcement actions against student debt relief companies, sued Corinthian and secured relief for its former students, and filed lawsuits against ITT Tech and an unlicensed for-profit nursing school for alleged unfair and deceptive practices. The AG’s Office also has reached settlements worth more than $6 million with Kaplan Career Institute, Lincoln TechSullivan & Cogliano, and Salter College. Last year, the Attorney General’s Office served on the rulemaking committee that drafted the Department’s updated loan discharge regulations.

Students looking for more information or assistance should visit the AG’s Student Lending Assistance page or call the Student Loan Assistance Unit Hotline at 1-888-830-6277.

This matter is being handled by Assistant Attorney General Justin J. Lowe and Paralegal Gabrielle Crossnoe of Attorney General Healey’s Consumer Protection Division with assistance from Assistant Attorneys General Dan Krockmalnic, Jared Rinehimer, Mychii Snape, and Paralegal Lois Martin, all of AG Healey’s Consumer Protection Division, Assistant Attorney General Jeffrey Walker of AG Healey’s False Claims Division, Arwen Thoman and Erica Harmon of AG Healey’s Insurance and Financial Services Division, staff from AG Healey’s Student Loan Assistance Unit, Investigators David Bolcome and Kristen Salera from AG Healey’s Civil Investigations Division, and AG Healey’s Chief of Staff Mike Firestone.