The Department of Education will cancel federal student loans for at least 1,800 students who attended DeVry University, once one of the nation’s largest chains of for-profit universities, because it fraudulently lured applicants during years with wildly exaggerated claims about their career prospects.
As the department has stepped up its debt forgiveness for students who have been victimized by their schools, the decision announced Wednesday is its first approval of fraud complaints involving a still-operating school.
Applications approved on Wednesday are just the start, officials said. They want other students who dated DeVry during the time he was making his false promises to seek help.
Between 2008 and 2015, department officials said, DeVry reported that 90% of its graduates found work in their field of study within six months. In fact, only 58% did. School officials were aware of the discrepancy and ignored former students’ complaints about it, department officials said.
Until Wednesday, the department had only taken action against schools that had closed, including big chains like Corinthian Colleges and smaller ones like Marinello Schools of Beauty.
“We think it’s really important to show that we are prepared to take these actions against open schools, and that there will be accountability for current owners of open schools,” said James Kvaal, undersecretary to education. press conference.
While noting that the allegations occurred when DeVry was under different management, a school spokeswoman, Donna Shaults, said DeVry believed the Department of Education misinterpreted the school’s statements. on the results of its graduates.
“We don’t agree with the conclusions they reached,” she said.
Officials framed Wednesday’s action as one of several moves to revitalize an enforcement arm of the Department of Education that has been gutted under the Trump administration. Betsy DeVos, President Donald J. Trump’s education secretary, has repeatedly blocked investigations into for-profit schools and appointed Julian Schmoke — a former DeVry dean — to head the enforcement division. agency law.
For four years, Ms DeVos’ agency approved no new grounds for defrauded student claims and dismissed 130,000 in what amounted to approval denials. Those rejections, and other stalled claims that have gone undecided for years, are now the subject of a class action lawsuit involving some 200,000 borrowers.
The Department of Education said in a court filing last month that it was close to settling the case and hoped to announce a deal by April.
The 1,800 former DeVry students approved for relief through the student fraud claims release system, known as the “borrower’s defense to repayment,” will have nearly $72 million in loans forgiven.
This means that they will not have to repay the loans made with taxpayers’ money. The department said it will sue DeVry’s current owner, Cogswell Capital, for compensation.
Cogswell Capital is an investment firm led by Bradley Palmer, a venture capitalist and financier. Mr. Palmer, who had no work experience in higher education, bought DeVry in 2018 from Adtalem Global Education, which operated several for-profit schools. Adtalem had called himself DeVry but changed his name in 2017 after a series of scandals involving the school.
In 2016, DeVry agreed to pay $100 million to settle a Federal Trade Commission lawsuit over its misleading claims about its graduates’ careers and earnings. A year later, DeVry settled similar claims brought by New York and Massachusetts.
A message left with Palm Ventures, which Mr Palmer described as a family office that manages his family’s assets, was not immediately returned. A representative for Adtalem did not immediately return a message seeking comment.
The Education Department said it also approved defense applications from borrowers of former students of the nursing program at ITT Technical Institute, Minnesota School of Business (also known as Globe University) and Westwood College. Including DeVry, the approvals announced Wednesday will clear $415 million in debt for 16,000 borrowers.