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The Biden-Harris Administration Wednesday announced the approval of nearly $37 million in borrower defense to repayment discharges for more than 1,200 students who enrolled at the University of Phoenix (Phoenix) between Sept. 21, 2012, and Dec. 31, 2014, and applied for relief. The U.S. Department of Education (Department) found that a national ad campaign from Phoenix misled prospective students by falsely representing that its partnerships with thousands of corporations, including Fortune 500 companies, would benefit students by, for example, giving them hiring preferences at those companies. In fact, Phoenix’s corporate partnerships provided no such benefits to students. The approved applications are from borrowers who enrolled in Phoenix during the covered time period and filed borrower defense applications that made allegations corroborated by this finding. Wednesday’s announcement brings the total amount of debt cancellation approved by the Biden-Harris Administration to more than $117 billion – including $14.8 billion in relief for 1.1 million borrowers whose colleges took advantage of them or closed abruptly.
“The University of Phoenix brazenly deceived prospective students with false ads to get them to enroll,” said Federal Student Aid Chief Operating Officer Richard Cordray. “Students who trusted the school and wanted to better their lives through education ended up with mounds of debt and useless degrees. Today’s announcement builds on the FTC’s work to provide relief to those affected by Phoenix’s misconduct and delivers on the Biden-Harris Administration’s mission to support student loan borrowers.”
The Department reviewed evidence obtained by the Federal Trade Commission (FTC) in its multi-year investigation into Phoenix that was ultimately resolved through a $191 million action in 2019, as well as evidence obtained from Phoenix during the Department’s fact-finding process. The evidence obtained by FTC included internal emails, policies, and procedures; recorded phone calls with prospective Phoenix students; and draft and final advertisements.
“Students deceived by the University of Phoenix deserve strong relief, and today’s action is an important step forward,” said Director of FTC’s Bureau of Consumer Protection Samuel Levine. “We will continue to work with our state and federal partners to protect students.”
Based on the evidence, the Department found that Phoenix’s substantial misrepresentations included the following:
- During its “Let’s Get to Work” national advertisement campaign, which began on Sept. 21, 2012, as well as in-recruitment calls and meetings, Phoenix misled borrowers about their employment prospects by misrepresenting the nature of Phoenix’s relationships with renowned and high-profile companies, including Microsoft, Adobe, AT&T, and the American Red Cross.
- Phoenix represented that its relationship with these companies created unique job opportunities for Phoenix students, which was not true.
- The school told borrowers that a Phoenix degree would help “get your foot in a few thousand doors” and that its corporate partners were “looking specifically at University of Phoenix students for hire instead of any other school,” which also was not true.
Phoenix did not have partnerships with companies to provide hiring preferences for its students. In fact, the school’s relationship with corporate partners did not result in any benefits to impacted Phoenix students. Corporate partners let Phoenix display their insignias and names in a career database portal, which gave the false impression that Phoenix offered unique job opportunities, when in reality all the jobs posted were available to the general public. Phoenix management was aware that the corporate relationships the school claimed to have did not exist. One senior vice president at Phoenix described one of the advertisements in question as “smoke & mirrors.” Another conceded to other company executives that the “Let’s Get to Work” ad campaign lacked factual support and needed improvement. Despite these concerns, Phoenix continued to falsely advertise its “connection” and “partnership” with corporate employers for more than two years, until December 2014.
The evidence demonstrated that Phoenix promised borrowers unique employment opportunities or connections to high-profile employers, but those promises were empty. Phoenix borrowers reasonably relied on these substantial misrepresentations to their detriment. Therefore, the Department determined that it is appropriate to grant complete relief on federal student loans for Phoenix borrowers who enrolled within the eligible period based on Phoenix’s hiring partner misrepresentations.
Wednesday’s announcement continues to demonstrate the importance for students and taxpayers of a strong partnership between the Department and other Federal agencies, like the FTC. The Department thanks the FTC for supporting this work to provide relief to students who were harmed, which built on the FTC’s success in obtaining a significant settlement from Phoenix in 2019.
The Department will notify affected borrowers by early October that their applications have been approved. These borrowers will see any remaining loan balances zeroed out and credit trade lines deleted. Any payments they made to the Department on their related Federal student loans will be refunded. The Department also intends to initiate a recoupment proceeding against Phoenix to seek repayment of the liabilities associated with these approved claims at a later date.
Borrowers who may qualify for relief because they have been affected by this finding can visit StudentAid.gov/borrower-defense to learn how to apply for borrower defense.
Unwavering commitment to relief
The Biden-Harris Administration remains steadfast in its commitment to use all available tools to deliver students, borrowers, and their families the relief they are entitled to. In addition to improvements to borrower defense, the Administration has also undertaken fixes to ensure that borrowers get relief promised by Congress through income-driven repayment programs, Public Service Loan Forgiveness, and discharges for borrowers with a total and permanent disability. The Department is also continuing a rulemaking process to provide further student loan relief to borrowers.