The Department of Education will cancel federal student loans for at least 1,800 students who attended DeVry University, once one of the nation’s largest commercial college chains, after it fraudulently lured applicants for years with hugely inflated claims about their career prospects.
As the department ramped up debt discharge for students who were victims of their school, the decision announced Wednesday marks the first approval of fraud claims related to a school that is still operating.
The claims approved on Wednesday are just the beginning, officials said. They want other students who visited DeVry during the time it made its false promises to apply for assistance.
Between 2008 and 2015, department officials said DeVry advertised that 90 percent of graduates found work in their field within six months. In reality, only 58 percent did. School officials were aware of the discrepancy and ignored complaints about it from alumni, department officials said.
Until Wednesday, the department had only taken action against schools that had closed, including large chains like Corinthian Colleges and smaller ones like the Marinello Schools of Beauty.
“We think it’s really important to show that we are willing to take these actions against open schools, and that there will be accountability for the current owners of open schools,” James Kvaal, the Secretary of State for Education, said on a news conference.
Noting that the claims took place when DeVry was under different leadership, a school spokeswoman Donna Shaults said DeVry believed the Department of Education had mischaracterized the school’s statements about the graduates’ results.
“We do not agree with the conclusions they have drawn,” she said.
Officials called Wednesday’s move one of several steps to reinvigorate an Education Department enforcement arm that had been removed during the Trump administration. Betsy DeVos, President Donald J. Trump’s education secretary, repeatedly obstructed investigations into for-profit schools and appointed Julian Schmoke — a former Dean at DeVry — to head the agency’s enforcement division.
For four years, Ms. DeVos’s office cleared no new grounds for defrauded student claims, rejecting 130,000 in what amounted to rubber stamp rejections. Those rejections and other stalled claims that remained undecided for years are now the subject of a class action lawsuit involving some 200,000 borrowers.
The Ministry of Education said in a lawsuit last month that it was close to a settlement of that case and hoped to announce a deal in April.
The 1,800 former DeVry students who have been approved for relief through the student fraud claim waiver system known as “borrower defense against repayment,” will be forgiven nearly $72 million in loans.
That means they don’t have to repay loans made with taxpayers’ money. The department said it would sue DeVry’s current owner, Cogswell Capital, for compensation.
Cogswell Capital is an investment company run by Bradley Palmer, a venture capitalist and financier. Mr. Palmer, who had no experience working in higher education, bought DeVry in 2018 from Adtalem Global Education, which operated several for-profit schools. Adtalem had called himself DeVry, but changed the name in 2017 after a series of scandals involving the school.
In 2016, DeVry agreed to pay $100 million to settle a Federal Trade Commission lawsuit over his misleading claims about his graduates’ careers and earnings. A year later, DeVry settled similar claims from New York and Massachusetts.
A message left with Palm Ventures, which Mr. Palmer has described as a family office managing his family’s assets, was not immediately returned. An Adtalem representative did not immediately return a message asking for comment.
The Department of Education said it had also approved borrower claims from former students of the nursing program at the ITT Technical Institute, Minnesota School of Business (aka Globe University) and Westwood College. Including DeVry, the approvals announced on Wednesday will wipe out $415 million in debt for 16,000 borrowers.
