Former Westwood College students get federal debt canceled

Any federal student loans used to attend the for-profit Westwood College from 2002 through 2015 will be canceled after federal officials found that the school greatly exaggerated the job prospects of its graduates, the Biden administration announced Tuesday.

The action will automatically erase $1.5 billion in federal student debt for 79,000 borrowers who attended the now-defunct college, according to the Education Department.

It adds to the administration's mounting effort to cancel federal loans for students who were defrauded by their colleges — more than $14 billion has been erased so far — and it follows President Joe Biden's sweeping plan to cancel at least $10,000 in student debt for millions of Americans.

The Westwood College cancellation applies to all students who attended the chain from Jan. 1, 2002, through Nov. 17, 2015, when the college stopped enrolling new students before its 2016 closure. Students will not need to apply for the relief.

With help from attorneys general in Colorado and Illinois, federal officials found that the college routinely misled prospective students about their chances of getting good jobs after graduating.

In its marketing materials, the chain advertised employment rates and salary outcomes that were "grossly inflated," the Education Department found. It also promised to help graduates pay their bills if they couldn't find jobs within six months after graduating — a pledge officials say wasn't kept.

In Illinois, the chain's criminal justice programs told students they could expect law enforcement jobs in agencies including the Illinois State Police, but Westwood never had the accreditation needed to meet employment requirements for the state, authorities found.

"Westwood operated on a culture of false promises, lies, and manipulation in order to profit off student debt that burdened borrowers long after Westwood closed," said James Kvaal, under secretary of education.

Kvaal said the administration is ramping up efforts to protect students and to "ensure that executives who commit such harm never work at institutions that receive federal financial aid again."

Before its closure, Westwood operated 15 campuses in California, Colorado, Georgia, Illinois and Virginia, along with online programs.

A group of students and civil rights organizations sued the Education Department in May demanding debt cancellation for Westwood students in Illinois based on findings of fraud there. It followed a settlement between the college and Illinois that erased institutional loans but not federal debt.

"It never should have taken this long — or litigation — for the Department of Education to do the right thing, but we are thrilled that the department has finally discharged the loans of defrauded Westwood College students," said Dan Zibel, chief counsel at National Student Legal Defense Network, one of the groups behind the suit.

Sen. Dick Durbin, D-Ill., called it a victory for students but said more must be done "to crack down on for-profit colleges that lie and lead Illinoisans into mountains of student debt without a viable degree or career path."

The cancellation is being granted through a federal rule known as borrower defense, which provides federal student debt cancellation to borrowers whose colleges misled them or defrauded them in other ways. The rule has mostly been used to erase debt used to attend for-profit colleges.

In similar actions, the Biden administration also moved to cancel nearly $6 billion for former students of Corinthian Colleges and nearly $4 billion for former students of ITT Technical institute.

After months of intense pressure for broader student debt cancellation, Biden last week unveiled a plan to forgive $10,000 in federal student debt for all borrowers with incomes less than $125,000 a year or $250,000 per household. Those who received a federal Pell Grant to attend college are eligible for an additional $10,000 in cancellation.

The plan, which is almost certain to be challenged in court, applies to federal student loans that were paid out before July 1 of this year. It applies to loans used to attend undergraduate and graduate programs.

Most borrowers will need to apply for cancellation through an application that the Education Department is expected to create by early October. Early applicants could see their student debt canceled before the start of next year, when a federal pause on student debt payments is set to expire.

The White House estimates the cancellation will cost $240 billion over the next 10 years, but outside analysts say it could be much higher. Official cost projections from the federal government are expected in coming weeks.