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Illustration: Sarah Grillo/Axios

Private equity funds are almost never liable for the misdeeds or financial responsibilities of their portfolio companies, because of how such deals are structured. In the case of for-profit college investments, that means taxpayers have been left holding the bag.

Driving the news: The Biden administration recently canceled $55.6 million in student loan debt for fraud victims of three for-profit colleges.

  • One of them was Marinello Schools of Beauty, which had been owned by private equity firm Abry Partners until it lost federal student aid access in 2016 and shut its doors.

This isn't first time that the feds have bailed out students who were defrauded by PE-backed, for-profit colleges. For example, private equity firms had stakes in publicly traded ITT Tech, whose former students were recently given $500 million in loan forgiveness.

Then there are PE-backed schools that do owe money to the Department of Education. But they haven't paid, and no collectors are hitting up private equity.

  • The largest of these, according to the National Student Defense Legal Network, is now-defunct Vatterott College, which owes $244 million.
  • Vatterott had been owned by TA Associates, which has a current portfolio company (Full Sail University) that continues to participate in Title IV loan programs.
  • NSDL also cites over $2 million owed to DoE by Fortis, an indirect portfolio company of JLL Partners.
  • Plus Education Corp. of America, which it says "has left taxpayers on the hook for at least $30 million, and likely more." Backers included Monroe Capital, Vision Capital and Landmark Partners.

Look ahead: There's still a backlog of tens of thousands of fraud claims that remain unforgiven, but which the Biden administration is working through.

The bottom line: Private equity funds typically lost their entire investment when for-profit college deals went south. But they didn't need to pay up for the fraud. The rest of us did.

Go deeper

Oct 17, 2021 - Health

Education secretary reveals limits to Biden’s mask push on states

U.S. Education Secretary Miguel Cardona, in an "Axios on HBO" interview, said he's reluctant to withhold federal funding from states that won't enforce school mask mandates because he doesn't want to hurt students.

Why it matters: Cardona's comments suggest there are limits to how far the Biden administration will go in pressuring states to adopt universal masking — or vaccine mandates.

Dan Primack, author of Pro Rata
9 mins ago - Economy & Business

Filings show Sweetgreen isn't profitable, despite claims

Illustration: Sarah Grillo/Axios

Restaurant chain Sweetgreen on Monday filed to go public, and revealed that it lost money in each year since 2014.

Why it matters: The company lied when it repeatedly told reporters it was profitable.

U.S. border cities again see low violent crime rates

Expand chart
Data: FBI, Kansas Bureau of Investigation, U.S. Census Bureau; Chart: Jared Whalen/Axios

Reported violent crime in the United States rose in 2020 for the first time in four years, but violent crime rates in 11 of the largest communities along the U.S.-Mexico border stayed below the national average, an Axios analysis found. 

Why it matters: Year after year, data showing low violent crime rates in majority-Mexican American and Mexican immigrant border communities dispels myths of the U.S.-Mexico border as a region filled with crime and chaos.