ED Approves $37 Million in Borrower Defense Discharges for Borrowers Who Attended the University of Phoenix

By Maria Carrasco, NASFAA Staff Reporter

The Department of Education (ED) on Wednesday announced that it approved $37 million in student loan debt discharges for over 1,200 borrowers who were enrolled in the University of Phoenix between Sept. 21, 2012, and Dec. 31, 2014, and applied for relief through borrower defense to repayment claims. 

ED said it found that a national ad campaign, which began in September 2012, from the University of Phoenix “misled” prospective students by falsely advertising that its partnerships with thousands of companies would benefit students, such as giving them hiring preferences when applying to jobs. However, ED found that the university did not have partnerships with companies to provide hiring preferences and the university’s relationship with companies did not result in “any benefits to impacted Phoenix students.” 

Specifically, borrowers were told that a University of Phoenix degree would help “get your foot in a few thousand doors” and that its company partnerships were “looking specifically at University of Phoenix students for hire instead of any other school,” which ED said was not true. As a result, ED said it deemed it appropriate to grant complete relief to eligible borrowers. 

ED said it reviewed evidence obtained by the Federal Trade Commission (FTC) in its multi-year investigation of the university, along with evidence obtained through ED’s “fact-finding process.” In 2019, the FTC reached a settlement with the University of Phoenix for $191 million, after the agency charged the university for deceptive advertising. 

Federal Student Aid (FSA) Chief Operating Officer Richard Cordray said in a statement that the University of Phoenix “brazenly” deceived prospective students with false ads. 

“Students who trusted the school and wanted to better their lives through education ended up with mounds of debt and useless degrees,” Cordray said in a statement. “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.”

A University of Phoenix spokesperson told NASFAA they "respectfully, but adamantly disagree with the U.S. Department of Education’s allegations."

“With respect to the borrower defense to repayment claims, the University of Phoenix takes student borrower complaints very seriously and has provided significant evidence to the Dept. of Ed refuting inaccurate, baseless, or incomplete claims," the spokesperson said in a statement. "While the university is not against relief for borrowers who have valid claims, we intend to vigorously challenge each frivolous allegation and suspicious claim through every available legal avenue."

Eligible borrowers will be notified by ED in early October that their borrower defense applications have been approved. Any payments these borrowers make to ED on their federal student loans will be refunded. Borrowers who think they were affected by today’s finding can apply for a borrower defense loan discharge. 

ED also announced that it will initiate a recoupment proceeding against the University of Phoenix in order to seek repayment of the liabilities associated with these approved claims at a later date.


Publication Date: 9/21/2023

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