Former Dream Center Students Could Lose Out on Loan Forgiveness Thanks to Education Dept.’s Mistake

The Education Department’s website is providing incorrect information about the now-shuttered Dream Center chain of for-profit colleges — a major mistake that could prevent some displaced students from getting the loan forgiveness they are entitled to.

The revelation surfaced on Wednesday at a House Veterans Affairs subcommittee hearing that focused on how college closures, which have increased markedly in recent years, are harming students who are veterans.

During questioning of an Education Department staff member, Rep. Susie Lee, a Nevada Democrat, complained that two students at the Art Institute of Phoenix had had their debt-relief applications improperly rejected. The rejection by the loan servicer was based on the department’s faulty website information, Lee said.

“It’s just hard to overstate the personal risk and stakes here,” Lee said. “Being told that they don’t qualify for full discharge, when in fact they do, is the difference between a lifetime of financial ruin or a lifetime of freedom.”

Robin Minor, an officer at the Education Department, told Lee that she was “not aware” of the website error, and she promised to investigate the two rejected loan applications.

“We want to ensure that every student that’s eligible for a closed-school discharge receives it,” said Minor, the deputy chief operating officer for partner participation and oversight in the department’s federal student-aid division.

The website mistake could affect large numbers of students.

The Art Institute of Phoenix was one of dozens of Dream Center locations that shut down from December to March, displacing well over 10,000 students.

For students who attend a college that closes, a loan discharge can be a big step toward rebuilding their lives. There’s no way to recoup the time spent taking courses, but the discharge at least wipes away their federal loans, since the students didn’t get the opportunity to finish their academic program.

The one catch: Students must have attended the campus within 120 days before closure. Lee told the Education Department that the two rejected student applications were part of a larger mistake: The department’s website has the incorrect closure date for multiple Dream Center locations.

A Chronicle review of the department’s website shows that three additional Argosy University campuses — San Francisco, Dallas, and Salt Lake City — have the same error.

For all four campuses, the date is wrong in a way that hurts students: It removes most of the 120-day window of time in which they would be eligible for a discharge. Each of these campuses closed in December, according to local media reports, but the department lists all of their closures as occurring in March.

In practice, that means that students who left the college in October, which is close enough to December to be eligible, could instead have their loan-forgiveness applications rejected because the department is using an incorrect March date.

Lee said the website problems reflect the department’s overall “improper handling” of the Dream Center collapse. Former Dream Center students have complained on Facebook of other bureaucratic mix-ups that have prevented their loan-forgiveness applications from being approved.

The Education Department did not immediately respond to questions from The Chronicle about when the incorrect website dates will be fixed, and how the department will handle the misunderstandings among students that the error may have caused.

The dates appear in a section of the website devoted to providing resources for students from closed colleges.

“Look for your school’s name, and find information about the closure and what your options are,” it states.

For students at the affected campuses, clicking on a link will take them to a spreadsheet that tells them: “You are NOT eligible for a closed-school loan discharge” if you withdrew before November 8. That is untrue. At the Art Institute of Phoenix, for example, students who left between mid-August and the December closure are eligible for loan relief.

It’s possible that students who read the department’s incorrect spreadsheet opted not to seek loan forgiveness, even though they were eligible.

Across the country, college closures have become a crisis for students and their families. A recent Chronicle analysis of federal data found that, in the last five years, about half a million students have been displaced by college shutdowns, on more than 1,200 campuses.

Those closures, which happened mostly at for-profit colleges, have disproportionately affected older students — most are age 25 or older, and many of the students have children to support. Minority students are also disproportionately affected.

Lawmakers on Capitol Hill have repeatedly cited The Chronicle’s statistics when pressing for solutions to the college-closure problem. On Tuesday the hearing was focused on the roughly 22,000 veteran students who have been displaced when their college shut down.

“Twenty-two thousand people, that’s just far too many,” said Rep. Mike Levin, a California Democrat. “We’ve got to do better.”

Michael Vasquez is a senior investigative reporter. Follow him on Twitter @MrMikeVasquez, or email him at michael.vasquez@chronicle.com.