More than 1,200 University of Phoenix students will have their student loans forgiven after the Education Department found that the for-profit institution offered them “empty promises” about its partnerships with thousands of corporations, the agency announced Wednesday.

The department is discharging $37 million total for borrowers who applied for relief under the borrower defense to repayment rules, which allow students to seek relief if they’ve been misled or defrauded by their college. The affected students attended the for-profit university from Sept. 21, 2012, to Dec. 31, 2014.

The Federal Trade Commission spent years investigating whether a national ad campaign touting the university’s relationships with companies including Microsoft and AT&T was deceptive. Phoenix reached a $190 million settlement with the FTC in 2019 to resolve the investigation but did not admit wrongdoing. The borrower-defense discharges stem from the FTC’s investigation, according to the release.

“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,” the department said in a news release. The ad campaign ran for two years.

The department said it intends to recoup the cost of the discharges from Phoenix, which is currently for sale. The University of Idaho announced earlier this year that it would spend $550 million to turn Phoenix into a nonprofit institution under the control of an affiliated organization. That transaction hasn’t closed, so a senior department official said at a news conference Wednesday that the institution’s current owner is the University of Phoenix.

Senate Democrats recently raised concerns about the acquisition, questioning how Idaho planned to cover potential liabilities such as those created by borrower defense to repayment claims. Idaho president Scott Green wrote in response that the university won’t be the owner of Phoenix, which will be run by a separate nonprofit.

“These allegations do not reflect University of Phoenix we know today,” Idaho spokeswoman Jodi Walker said in a statement. “We value the student focus and vision University of Phoenix has today and stand by our commitment to affiliate.”

A University of Phoenix spokesperson “adamantly” disagreed with the department’s findings.

“The claims made by the FTC and the Dept. of Ed were never tested in court,” the spokesperson said in a statement. “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. 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.”

Katherine Knott

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