A New Opportunity from Art Institute Lawsuit

art institute loan forgiveness

Being sued is not a new experience for Art Institutes. Since 2000, the parent company of Art Institutes, Education Management Corporation, has dealt with numerous lawsuits based on students, employees, or government organizations’ claims. Most of those parties argued that the Art Institutes engaged in deceitful actions, and its recruiters misled the students. Some lawsuits resulted in favor of the plaintiffs who brought the case to the court and required the officials to correct the wrongdoings. One such Art Institute lawsuit ended at the beginnings of 2020 and brought favorable conditions for plaintiffs and previous school students. 


What was the Case?

In October 2019, a group of former students of the Art Institute of Colorado and Illinois brought a case against the Department of Education and Secretary Betsy DeVos. These students claimed that the Department of Education facilitated the wrongdoings of the school. The Art Institutes were not accredited, which means they could not have received the student loan aid. However, the schools kept offering loans for new students. In such a case, the Department of Education was accused of knowingly providing the loans, and the students demanded that they were not obliged to pay back if the loans were unlawful. 

In this Art Institute Lawsuit, the attorney representing the students mentioned that the schools kept lying to the students and offering loans even though they lost the accreditation in January 2018. Therefore, the students who took the loans in this period should be relieved by expanding the eligibility window. 

What is the Eligibility Window?

As Art Institutes closed a vast number of their campuses all around the U.S, they created an opportunity for students to eliminate their debt through Closed School Discharge. Initially, the discharge criteria include that a student is eligible if the school closed within 120 days (4 months) after the withdrawal. Previously, the Department of Education extended the eligibility window to June end 2018 for schools that closed in December of that year. However, some schools could not still benefit from this expansion. Later, the Department of Education agreed to expand the eligibility window for four more schools: Art Institute of Colorado, Illinois, and Michigan. These institutes were closed in March 2019, but they announced the closure in 2018.

Yet, all those changes did not cover all the students from four schools that withdrew before June end 2018. For this reason, this Art Institute lawsuit started in October 2019.


How did the Lawsuit Progress?

When the Art Institute Lawsuit started, the House Education Committee revealed that the Department of Education provided federal student aid to the four schools of the Art Institutes, worth $10.7 million for the spring semester. As these schools lost their accreditation in January 2018, they should not have received the aid and offered loans to them. 

The accreditor of these schools- the Higher Learning Commission, stated that they informed the institute about the downgrading in accreditation and informed that the institute should spread the word. The main reason for downgrading to “pre-accreditation” was the education quality, and the commission decided to keep this status for four years. Yet, the Art Institute did not fulfill its obligations and continued the ordinary course of operations.

Result of the Lawsuit

As a result of the lawsuit, the Department of Education agreed to extend eligibility for the Art Institute’s closed school students. Notably, four schools were eligible for this extension:

  • The Art Institute of Colorado (two locations)
  • The Illinois Institute of Art in Chicago
  • The Illinois Institute of Art in Schaumburg
  • The Art Institute of Michigan in Novi

Instead of June end 2018, the eligibility criteria now cover the whole period from January 20, 2018, when these schools lost their accreditation. 


What is Next?

You might come across much news that celebrates the victory of students in the Art Institute Lawsuit. However, there still exists a considerable number of students suffering from their educational loans. After this case, a group of attorney generals urged DeVos to eliminate the loans from Dream Center schools closed in 2018 and 2019. Dream center purchased the Art Institute Schools in 2017. While the Obama Administration did not approve this transaction, the Secretary of Education Betsy DeVos approved it. 

Such cases can happen from time to time, so it is better to say updated to find new opportunities.

What can Former Students do?

If this Art Institute Lawsuit does not benefit you, you can still get a chance for student loan forgiveness. Some students who were victims of the Art Institute practices and closure can get their debt canceled. Two programs help to achieve this goal- Borrower’s Defense to Repayment and Closed School Discharge. 

Borrower’s Defense to Repayment

One of the most generous federal aid programs is Borrower’s Defense to Repayment. It helps students who were victims of misleading recruiters, false advertisement, or university officials’ misconduct. If a student recruiter lies about the employment rate after graduation, credit transfer issues, or does not share all education costs, students have a right to apply to this program. The main eligibility criteria include proof for the misconduct. If the students can prove that they were misled, then they will get the forgiveness opportunity. 


While it might seem simple, proving a case can take a lot of effort. A student should provide emails with the university officials, brochures where false advertisement claims were mentioned, etc. Any document that shows unlawful actions can be proof. Students of the Art Institute can be a little lucky in this issue. Previously, there was an Art Institute lawsuit because of deceptive marketing tactics through inflated job placement ratings. Another lawsuit was brought when the institute failed to notify students about the loss of accreditation. In short, such former cases increase the chance of students getting forgiveness through Borrower’s Defense to Repayment.

Closed School Discharge

Another program available to Art Institute students is Closed School Loan Discharge. As most of its schools are closed, former students can get rid of their student loans. If the students were enrolled or on approved leave during school closure, they would qualify. In case of withdrawal, the school closure should happen within 120 days. As discussed in this guide, this period can be different depending on the school.

How to Avoid For-Profit Fraud?

Even if some federal programs cancel student debt, it is desirable to stay away from fraudulent organizations. Hence, students should be careful before enrolling. 

First, before deciding on a university, potential students need to check the quality of their education and the existence of accreditation. In this way, reading reviews from other students and sitting in the classes can be helpful. Second, students should read the documents carefully before signing them and keep copies for future issues. Lastly, if any legal action is required, it is better to check the Art Institute Lawsuit between the school and previous students, states, or government.

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