Over 1,200 University of Phoenix students are set to have their student loans forgiven by the Education Department, following allegations of the for-profit institution making “empty promises” about its corporate partnerships, as announced by the agency on Wednesday.
Under the borrower defense to repayment rules, allowing students to seek relief if they were misled or defrauded by their college, the department is discharging a total of $37 million for borrowers who attended the for-profit university from Sept. 21, 2012, to Dec. 31, 2014.
FTC settlement leads to loan forgiveness
The Federal Trade Commission (FTC) had previously investigated a national ad campaign that promoted the university’s partnerships with major companies like Microsoft and AT&T, ultimately reaching a $190 million settlement with the university in 2019, although the university did not admit wrongdoing. The borrower-defense discharges result from the FTC’s inquiry.
According to the department, the university had falsely claimed that a degree from Phoenix would open “a few thousand doors” and that its corporate partners were giving preferential hiring treatment to University of Phoenix students over those from other schools during the two-year ad campaign.
The department also expressed its intention to recover the discharge costs from the University of Phoenix, which is currently up for sale.
The University of Idaho had previously announced a $550 million plan to convert Phoenix into a nonprofit institution under an affiliated organization’s control.
However, this transaction has not yet been finalized, and the University of Phoenix’s current owner remains the University of Phoenix, according to a senior department official.
Senate Democrats had previously raised concerns about the acquisition, specifically questioning how the University of Idaho planned to manage potential liabilities, such as those arising from borrower defense to repayment claims.
In response, Idaho’s president, Scott Green, clarified that the University of Idaho would not be the owner of Phoenix, which would be operated by a separate nonprofit entity.
The University of Phoenix strongly disputed the department’s findings, asserting that the claims made by the FTC and the Education Department had not been tested in court.
The university expressed its commitment to challenging allegations and suspicious claims through legal means, while acknowledging that it is not opposed to offering relief to borrowers with valid claims.