Alumni of Manchester’s defunct Mount Washington College could call in their federal student loans after a federal judge last week approved a settlement with the US Department of Education that could erase the debt of hundreds of thousands of borrowers who participated – Profit colleges.
Mount Washington College, once located in an office park on Sundial Avenue in Manchester with branches in Salem, Concord, Portsmouth and Nashua, had more than 1,800 students at its peak. It’s one of 153 colleges listed in the proposed settlement in a federal court case filed by student borrowers who attended for-profit schools that they say misled them about the value of education.
Individuals who took out federal student loans to attend any of the listed colleges and who filed a “borrower defense motion” with the US Department of Education before June 22 will have their loans automatically forgiven if the settlement is approved. A final hearing on the settlement is scheduled for early November.
If a court grants final approval, up to 200,000 borrowers nationwide could have their student debt automatically forgiven.
Other colleges included in the proposed settlement include national chains Globe University and Capella University, as well as Massachusetts-based Salter College and the New England College of Art.
Mount Washington College, formerly known as Hesser College, closed in 2016 after enrollment plummeted in the early 2010s. The college had been owned by the Kaplan Higher Education Group, which also owned a chain of professional colleges in Massachusetts.
In 2015, Kaplan paid a $1.3 million settlement to address allegations that they overstated job placements, employed unqualified instructors, and used unfair recruitment tactics to convince prospective students to apply to their programs to register. The company did not admit any wrongdoing.
Kaplan was later acquired by Purdue University Global — another of the for-profit colleges whose students saw their credits wiped out with the new settlement.
High cost, dubious result
The for-profit higher education industry has been under scrutiny for more than a decade.
A 2012 US Senate committee investigation found that for-profit colleges typically charge more than community colleges and state universities and account for a disproportionate share of student loans. The research found that about 86% of the industry’s revenue came from federal funds, including loans and benefits for veterans.
Students attending for-profit colleges raised concerns about aggressive recruitment, inflated job placement rates, unqualified instructors — and student debt that they were struggling to repay without meaningful job prospects. The Obama administration imposed stricter regulations on for-profit colleges and began waiving federal student loans for students attending troubled schools.
In the final six months of the Obama administration, the Department of Education forgave more than 28,000 students who had taken out government student loans to attend for-profit colleges.
But the process stalled during the Trump administration, when attorneys representing student borrowers claimed that no applications for borrower defenses had been approved in two years.
Lawyers for the Project on Predatory Student Lending filed a class-action lawsuit against the Department of Education in 2019, urging the Department to resume reviewing lending.
A proposed settlement in the case was announced in June.
The Department of Education approved automatic loan forgiveness for about 200,000 students who enrolled before March 22.
A department official’s letter, filed with court documents, explains that the schools listed were selected because of “strong evidence of material wrongdoing” and because they had a large number of borrower defense requests.
A judge’s initial approval of the settlement last week brought loan origination one step closer for borrowers.
The US Department of Education announced in June that it would also repay federal student loans for people who borrowed to attend Corinthian colleges. In 2021, it made loans to 1.5 million borrowers who attended the ITT Technical Institute.