Biden admin canceling $130M in debt for students who it says were 'ripped off' by Colorado college

The Biden administration on Tuesday said it was canceling $130 million in federal debt for 7,400 students who went to a Colorado college that the government says lied about its successes.

"These borrowers were lied to, ripped off and saddled with mountains of debt," President Joe Biden said in a statement.

It's not the first time the administration has canceled federal loans for people whom the government believes were misled or short-changed by for-profit colleges: So far, the Department of Education has forgiven $14.7 billion in such debt, spread across nearly 1.1 million borrowers, including for those who attended Corinthian Colleges and ITT Technical Institute, both of which are now defunct.

Tuesday's debt relief will be automatic and covers Colorado students of CollegeAmerica who attended between 2006 and July 1, 2020.

The effort also comes on the heels of debt relief actions for people who participated in programs like the Public Service Loan Forgiveness program and income-driven repayment loan plans, both of which, the Department of Education has acknowledged, were not working as intended for borrowers.

CollegeAmerica had three locations in Colorado and closed down completely in 2021 after a successful lawsuit brought by the state, according to the Department of Education. (Center for Excellence in Higher Education subsequently appealed.)

"CollegeAmerica knowingly took advantage of students by luring them into high-priced, low-quality programs with promises of high-earning potential and job placement that it knew were not attainable," Colorado Attorney General Phil Weiser said in a Tuesday news release.

"Protecting borrowers from predatory lending and helping Coloradans navigate through student loan burdens will continue to be a priority for our office," he said.

The Center for Excellence in Higher Education, which operated CollegeAmerica, could not be reached for comment. The organization sued the Department of Education last year, claiming that the federal government improperly targeted their schools and illegally withheld funds such as reimbursements for student financial aid. The Department of Education is seeking to dismiss the suit.

"While my predecessor looked the other way when colleges defrauded students and borrowers -- I promised to take this on directly, and provide borrowers with the relief they need and deserve," Biden said in his Tuesday statement, swiping at former President Donald Trump. "As long as I am president, we will never stop fighting to deliver relief to borrowers, hold bad actors accountable, and bring the promise of college to more Americans."

According to the Department of Education, among other misrepresentations, CollegeAmerica was advertising that students would earn high salaries post-grad, when, in fact, graduates earned just $25,000, on average, five years out of school -- less than the salaries of high school graduates.

CollegeAmerica also advertised "iNFLated and falsified job placement rates" of 70%, though the Department of Education said the actual rate was just over half that -- 40%.

"This included counting a Business administration graduate working as a produce clerk and a medical specialties graduate working as a waiter as successful placements," the Department of Education said.

In two other examples, according to the department, CollegeAmerica falsely maintained from 2006 to 2010 that one of its programs could "lead to EMT certification" even though "it never offered EMT classes at its Colorado campuses" that would qualify for the state's certification test. And from 2007 until 2017, CollegeAmerica described a financial assistance program, EduPlan, as "affordable" despite knowing "students were unable to afford [the] loans," the department said.

The debt relief comes after a multiyear government investigation.

Borrowers will have their federal loans canceled regardless of whether they have filed a borrower defense to repayment application, the Department of Education said. That application is a form people can fill out to report schools for misleading their enrollees.

People will begin to be notified in August if they are approved for cancellation related to CollegeAmerica and see any remaining loan balances zeroed out as well as credit trade lines deleted, the department said, and any payments they made to the department will be refunded.