The Department of Education found that the schools misled prospective students about graduates' job placement rates and average salaries.
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The administration is using its authority under an existing federal student loan program, known as borrower defense to repayment, which makes borrowers eligible for debt relief if they have been defrauded by their college.
As the November election approaches, President Joe Biden has been touting how it has become easier for many borrowers to qualify for federal student debt relief since he took office. The administration has been sending emails directly to those who are newly eligible.
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"While my predecessor looked the other way when colleges defrauded students and borrowers, I promised to take this on directly to provide borrowers with the relief they need and deserve," Biden said in a statement Wednesday.
A total of almost $160 billion in student loan debt for nearly 4.6 million borrowers has been canceled under Biden to date. That's 10% of all outstanding federal student loan debt.
Wednesday's announcement is one of the biggest group discharges made under the borrower defense program and follows multiple investigations by attorney general offices in Iowa, Massachusetts and Pennsylvania into The Art Institutes and its parent company Education Management Corporation, known as EDMC.
Last year, the Department of Education used the borrower defense to repayment program to cancel nearly $37 million of student loan debt for borrowers who attended the University of Phoenix and $72 million for students who enrolled at Ashford University, now known as the University of Arizona Global Campus.
Who qualifies for debt relief?
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Borrowers who were enrolled at any Art Institute campus between January 1, 2004, and October 16, 2017, and have outstanding federal student loan debt will see it wiped away.
After that 2017 date, EDMC sold or closed all of its campuses. The last remaining eight campuses were abruptly shut down last year.
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Eligible borrowers will not have to take any action. The relief will be applied automatically, including for borrowers who have not yet applied for borrower defense.
The Department of Education said it would take immediate steps to pause impacted loans so that borrowers will not need to make payments during the time needed for loan servicers to process the discharge. The debt will also be removed from borrowers' credit reports.
Student loan forgiveness under Biden
Even though the Supreme Court struck down Biden's signature student loan forgiveness program last year, the administration has been continuing to deliver debt relief through several existing programs that target certain groups of borrowers, including public-sector workers, those defrauded by their college and permanently disabled borrowers.
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A new student loan repayment plan launched by the Biden administration last year has also delivered some student loan forgiveness. Known as SAVE (Saving on a Valuable Education), the plan offers the most generous terms for low-income borrowers and cancels outstanding debt for borrowers after they have made payments for at least 10 years.
The Department of Education is also conducting a recount of past payments to fix administrative errors, bringing some people closer to debt relief.
Since the fall, the Biden administration has been working on set of new proposals to deliver relief to certain groups of borrowers.
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For example, those whose student loan balances are bigger than what they initially borrowed could see their accumulated interest wiped way.
Those proposals have yet to be finalized, but some could go into effect as soon as this fall, according to administration officials.
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