In Shift, Education Dept. Will Automatically Forgive Student Loans Incurred at Defunct For-Profit

With one week left before its leadership changes hands, the U.S. Department of Education announced on Friday that it would automatically grant loan-debt relief to former students at the American Career Institute, a defunct for-profit college in Massachusetts. The move is a shift from how the department has so far granted relief to defrauded borrowers, requiring them to apply for it.

The department said in a news release that it would send emails to former students of the institute starting on Tuesday, to inform them that existing federal loans used to attend the for-profit college would be discharged. The Massachusetts attorney general sued the institute in 2013, accusing it of engaging in deceptive practices.

“This is real progress,” said the U.S. under secretary of education, Ted Mitchell, in the department’s release. “And more work remains to ensure that relief continues for borrowers who are deceived by institutions that engage in fraud.”

In its release, the department also provided updates on other efforts to grant relief to defrauded borrowers. Among other things, the department said it had approved more than 28,000 applications for relief from former students at the defunct Corinthian Colleges, amounting to more than $558 million in relief.