Art Institutes Borrower Defense Forgiveness: How it Works

For countless former Art Institute students, the dream of a brighter future through education quickly turned into a nightmare of overwhelming debt and shattered hopes. The for-profit college’s predatory practices and misrepresentations left countless individuals burdened with loans they could not afford, struggling to find employment in their fields, and facing a lifetime of financial struggle.

But the Biden-Harris administration has delivered hope.

In a recent press release, President Biden and the U.S. Department of Education announced a group discharge of over $6.1 billion in student loan forgiveness for over 300,000 former Art Institute students.

This life changing application-free cancellation is open to all students who went to the school’s campuses between 2004 and 2017.

As one former student shared, “I’ve been drowning in debt since I graduated, barely staying afloat. This news feels like a second chance at life, a weight lifted off my shoulders.”

Note: We’re awaiting clarification from the Federal Student Aid Ombudsman regarding the specific timeline for loan forgiveness and the refund process. We will update this article when more information becomes available. Meanwhile, please stay in contact with your loan servicer and track official channels for updates.

Related: Art Institute Student Loan Forgiveness Programs

Who’s Eligible For Forgiveness?

If you attended an Art Institute campus between January 1, 2004, and October 16, 2017, and took out federal student loans to finance your education, you may be eligible for automatic loan discharge.

The eligibility is contingent on:

• Enrollment Dates: You must have attended during the specified period.

• Type of Loans: Only federal student loans are eligible. Private student loans do not qualify.

• No Previous Discharge: You have not received a discharge of your loans through other means, such as borrower defense or closed school discharge.

How to Check Your Eligibility

To verify your eligibility for the loan discharge:

1. Log in to your Federal Student Aid (FSA) account at StudentAid.gov.

2. Review your borrowing history to confirm attendance during the eligible period and that the loans taken were federal.

3. If you meet the criteria but have not received a notification, contact your loan servicer or the Federal Student Aid Information Center at 1-800-433-3243 for further help.

Related: How Do I Know If My Student Loans Were Discharged?

The loan discharge process for eligible Art Institute borrowers has been designed to be straightforward and automatic.

Here’s what you need to know:

Your Loans Will Be Put Into Forbearance

Your servicer will automatically place your eligible loans in forbearance. This means you can stop making payments on those loans. But if you have loans from other schools, you must keep paying on those.

Eligibility for Refunds on Past Payments

You’ll receive a refund on payments made on loans identified for discharge. We’re waiting on clarification from the Education Department for borrowers who paid off their loans or refinanced with a private lender.

Details on how to the refund process will work and how it will take place will come in the next few weeks. But if it works as it did for Public Service Loan Forgiveness and the one-time account adjustment, borrowers may get a refund 6 to 8 weeks after the loans are forgiven.

When Your Loans Will Be Forgiven

The Education Department hasn’t said when you’ll see the forgiveness applied to your account. But it is working to get it done quickly.

While no specific timeline is provided for completing the entire discharge process, the Department is expediting discharges. They’ll send you updates as progress occurs.

Impact on Credit Scores

Once the loans are discharged, the credit bureaus will remove the loans from your credit report, including any late payments or default statuses.

This change might lead to your credit score going up, but some people who without a long credit history from a mortgage, credit card, or personal loan, might see a temporary dip once the Art Institutes loans have been removed from their reports. That’s because the average age of their accounts might have gone down.

Related: List of Schools That Defrauded Students

What if I attended an Art Institute campus before January 1, 2004, but was still enrolled during the eligibility period?

If you were enrolled at an Art Institute campus on or after January 1, 2004, and continued your enrollment into the eligibility period (up to October 16, 2017), you may still qualify for loan forgiveness. The Education Department is working to provide more clarity on this situation.

Are all my loans eligible for forgiveness, or only those taken out during the specified dates?

The loan forgiveness initiative applies to federal student loans taken out to attend an Art Institute campus during the eligibility period. Loans from other institutions or private loans may not be eligible for this specific relief program. However, other forgiveness or repayment options may be available.

What if I’ve already paid off my Art Institute loans? Can I get a refund?

If you believe you are eligible for a refund on payments made towards your discharged loans, follow these steps:

1. Gather documentation of your payments, such as bank statements or payment receipts

2. Contact your loan servicer to ask for information on the refund process

3. Submit a refund request form, along with any required documentation

4. Allow 60-90 days for processing and follow up with your loan servicer if needed

Will I owe taxes on the loans forgiven?

Thanks to the American Rescue Plan Act of 2021, student loan forgiveness is tax-free through 2025.

If your loans are discharged under the Art Institute loan forgiveness initiative, you won’t face a hefty tax bill on the forgiven amount.

But it’s always a good idea to consult with a tax professional to understand your specific situation.

If you have private student loans from the Art Institutes, you may still have options for relief, even though the recent loan forgiveness initiative primarily focuses on federal loans. Here are some paths to explore:

1. Contact your lender: Reach out to your private lender to discuss potential relief options, such as deferment, forbearance, or interest-rate reduction. These options may help you temporarily reduce or suspend payments if you’re facing financial hardship.

2. Loan settlement: In some cases, you may be able to negotiate a settlement with your lender, which could involve a lump sum payment or a reduced payoff amount. Be sure to get written agreements and seek legal advice before finalizing any settlement.

3. Lender-specific programs: Some lenders, like Navient, have recently introduced loan forgiveness programs for certain borrowers. As one Redditor shared in the r/BorrowerDefense subreddit: “If you happen to be one of the Navient private loan borrowers who gets one of these applications sent to you in your email or snail mail, I strongly urge you to make sure that you absolutely study any fine print. Make sure that you’re not giving away any rights by applying.” If you receive this application, pay close attention to the details, deadlines, and consider seeking legal advice before applying.

4. Explore legal options: If you believe you have a case for school misconduct, consult with legal professionals specializing in student loans to understand your options for defending against collection lawsuits or seeking loan relief.

Related: Do I Qualify For The Navient Lawsuit Settlement?

Loans from the Art Institutes are being forgiven due to systemic deceptive practices uncovered by a collaborative investigation by the U.S. Department of Education and state attorneys general of Iowa, Massachusetts, and Pennsylvania.

The investigation revealed that the Art Institutes and its parent company Education Management Corporation (EDMC):

• Inflated Employment Rates: The institution falsely claimed over 80% of graduates found employment within six months of graduation, while the actual rate was no higher than 57%.

• Misleading Salary Information: Advertised salaries misleadingly included comparisons to celebrity earnings, such as Serena Williams, skewing expectations for average graduate salaries.

• Broken Career Service Promises: Promises of comprehensive career services resulted in minimal employer connections and inadequate job placement support for graduates.

If you went to the Art Institutes during the eligible period, here’s what you can do to make sure you get your loans forgiven:

• Log Into Your FSA Account: Visit StudentAid.gov and log into your Federal Student Aid (FSA) account. This is your central hub for managing your federal student loans.

• Update and Verify Your Contact Information: Navigate to your profile, select “Update Profile,” and verify or update your email, mailing address, and phone number. Keeping your contact information correct ensures you receive all necessary communications without delay.

• Check for Notifications: Regularly review any updates or notifications in your FSA account or via the contact methods you’ve updated. This includes important information about your loan discharge status.

• Track Your Loan and Credit Report: Keep an eye on the progress of your loan discharge within your FSA account to make sure everything is moving forward as expected. Once that happens, check your credit report to confirm that your loans are properly discharged and any negative reporting is removed.

Explore Additional Options

If some of your loans are not covered by the Art Institutes discharge or you have other student loans, consider other forgiveness programs such as Public Service Loan Forgiveness (PSLF) or income-driven repayment plans. Each of the IDR plans offer loan forgiveness after 20 to 25 years of payments.

Related: How to Apply for Student Loan Forgiveness After 20 Years

The Biden administrations decision to provide former Art Institutes students marks a significant step towards rectifying the harms caused by predatory practices that focused on profits over people.

While the details of the relief process are still being finalized, the key thing to know is that is that the Education Department is ensuring you’re no longer saddled with this debt.

To stay up to date on the latest news on this program, subscribe to our free weekly newsletter. Every Wednesday we send the latest student loan news to your inbox helping you get even smarter about your repayment and forgiveness options.