Student Loan Update as City Cancels Thousands of Dollars

Some students in Pennsylvania will have their entire student debt wiped after the Pittsburgh Career Institute (PCI) closed.

In all, the Pennsylvania attorney general will be canceling $218,000 in outstanding loans from students who attended the now shuttered school.

"The sudden closure of Pittsburgh Career Institute left many students with outstanding balances," Attorney General Michelle Henry said in a statement. "It is only right that these students are not on the hook for those balances. My office is committed to helping students who spend much money, time, and effort on higher education and do not receive the promised benefits."

Pittsburgh Career Institute operated until recently as a healthcare and veterinarian program. In November 2022, however, the institute said it would be closing because the Department of Education no longer accepted the institutional accreditor for PCI—the Accrediting Council for Independent Colleges and Schools.

While Pittsburgh Career Institute had 18 months to find a new accreditor, the school instead chose to close entirely, leaving around 200 students with nowhere to go.

Newsweek could not immediately locate any representative for PCI.

According to financial literacy instructor Alex Beene, however, the loan cancellation might not be enough to cover what students lost.

"The result is a double-edged sword for students," Beene told Newsweek. "The elimination of student debt is obviously a massive positive for their financial outlook, but students who were involved in additional testing and training programs may still be on the hook for those fees without the ability to complete them. "

Student loan experts say this experience with the Pittsburgh Career Institute is a warning to other students who may be interested in schools run to make a profit. In many cases, the value of the degree isn't worth the cost of attendance, said Student Loan Sherpa founder Michael Lux.

"Ultimately, Pittsburgh Career Institute joins a long line of for-profit schools who put the interests of shareholders ahead of students," Lux told Newsweek. "This story is yet another example of the dangers of attending a for-profit institution. Sadly, students still need to exercise great care when selecting a college."

This isn't the first time Pennsylvania students have seen their student debt cleared, as the attorney general has previously canceled more than $200 million in student debt for various reasons.

Nationally, 45 million Americans hold a collective $1.75 trillion in student loans.

Previous efforts by President Joe Biden to pause student loan debt for Americans were suspended in October when payments resumed. Initially, Biden's SAVE plan saw those with incomes below $32,000 stop making monthly payments. It's unclear what sort of debt forgiveness could be approved in the future after the Supreme Court struck down Biden's forgiveness plan.

"Borrower defense relief may help students who have been victimized by the unethical practices of specific schools, but it does not help the broader student loan problem," Richard Barrington, a financial analyst with Credit Sesame, told Newsweek.

"In many cases there is a disconnect between the institutions that misled students and the lenders that are on the hook for the loans. In those cases, it isn't the unethical institutions that are paying the price."

While other students may see their debt canceled if schools close this year, it could be difficult to allocate the money from state governments, Beene said.

"Some smaller colleges that were booming pre-pandemic are now struggling to get more students in the door, and this could lead to more closures that will carry more financial burdens," Beene said. "Ultimately, I think states will have to set in place procedures for what type of debt they are willing to eliminate, because this is going to get more, not less, prevalent in the coming years."