Biden cancels $238 million student debt for 28,000 cheated borrowers

Today, the federal Department of Education announced it will deliver relief to tens of thousands of borrowers harmed by pervasive and widespread misconduct at Marinello Schools of Beauty.

Borrowers who enrolled in the schools from 2009 through its closure in February 2016 will receive loan discharges based on borrower defense findings.

Marinello Schools of Beauty was a private, for-profit cosmetology school owned by B&H Education, Inc. with as many as 56 locations throughout California, Connecticut, Kansas, Massachusetts, Nevada, and Utah.

These 28,000 borrowers will receive loan discharges totaling approximately $238 million. This group discharge will provide relief to borrowers who enrolled at Marinello during this period, including those who have not yet applied for a borrower defense discharge.

While the department continues its work to review borrower defense claims, it is also bringing on four key hires in the Federal Student Aid (FSA) Office of Enforcement with significant federal, congressional, and state oversight experience.

“Marinello preyed on students who dreamed of careers in the beauty industry, misled them about the quality of their programs, and left them buried in unaffordable debt they could not repay,” said U.S. Secretary of Education Miguel Cardona.

“Today’s announcement will streamline access to debt relief for thousands of borrowers caught up in Marinello’s lies,” said Cardona. “At the Department of Education, we will continue to strengthen oversight and enforcement for colleges and career schools that engaged in misconduct and uphold the Biden-Harris Administration’s commitment to helping students who have been harmed.”

This Marinello group discharge reflects the department’s findings that the school engaged in pervasive and widespread misconduct that negatively affected all borrowers who enrolled at Marinello during the covered time period.

These findings led the department to approve individual borrower defense claims last summer. This group discharge will facilitate relief to additional borrowers harmed by Marinello’s actions, including many who have not yet applied for borrower defense.

It is the first group discharge for defrauded borrowers to be approved since 2017, after the Trump administration failed to approve any group claims.

Today’s actions bring the total amount of approved relief based on borrower defense findings during the Biden-Harris Administration to about $2.1 billion for 132,000 borrowers.

To date, the department had approved approximately 300 borrower defense claims at Marinello under findings reached last July that Marinello made widespread, substantial misrepresentations about the instruction that would be offered at its campuses across the country.

The department found that the schools failed to train students in key elements of a cosmetology program, such as how to cut hair. It also found that Marinello left students without instructors for weeks or months at a time as part of a pattern of failing to provide the education it promised.

As a result, students would have found it extremely difficult to pass necessary state licensing tests and receive the promised return on their educational investment. Not only did Marinello fail to teach its students, class-action lawsuits filed in Nevada and California alleged that the school used salons as profit centers and exploited students as a source of unpaid labor.

The department has continued to analyze the evidence related to Marinello and concluded that the misconduct was so widespread across all the school’s campuses over a period of years that all borrowers who attended between 2009 and the schools’ closures in 2016 are entitled to full student loan.

The department’s Marinello findings stem primarily from the agency’s investigative work that began in 2015 and that resulted in the department removing the school from the federal student aid programs.

At all times relevant to the findings, Marinello was owned by B&H Education Inc. (B&H), which was a Delaware corporation.

The leaders of B&H included Rashed Elyas as president, Mike Flecker as chief financial officer, and Nancy Alpough as financial aid administrator.

Department records also identify the following individuals as board members at some point during the period of these borrower defense findings: Nagui Elyas, Erik Brooks, Bob Pan, Tomer Yosef-Or, Brent Stone, James Goodman, Daniel Neuwirth, Anna Keeling, James Rich, Frank Lincoln, and Gerald Taylor.

The department will soon begin notifying students who attended Marinello of their approvals for discharge, with discharges following in the months after. Borrowers will not have to take any additional actions to receive their discharges.

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