Feds to forgive $238 million in loans for students of failed Marinello beauty schools

Former students of the shuttered Marinello Schools of Beauty will have their loans forgiven, totaling $238 million for approximately 28,000 students, the federal government announced Thursday.

The news comes six years after Marinello abruptly closed its doors at its beauty schools across the country, including campuses in Los Angeles, Burbank, Moreno Valley and Sacramento. The for-profit college was owned and managed by B&H Education Inc. and headquartered in Beverly Hills.

Federal investigators found numerous issues with the school’s management and the company’s business model. B&H was run by its president Rashed Elyas, Mike Flecker and Nancy Alpough, authorities said.

Marinello “engaged in pervasive and widespread misconduct” that hurt all students enrolled in its schools, the Department of Education said in a statement. Students were deprived of basics lessons taught in a cosmetology program and were unable to pass the necessary state licensing tests, it said.

Students also alleged in class-action lawsuits the school used salons as profit centers and the students as unpaid laborers.

“The Department has ... 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 of Education said.

In February 2016, the department announced it would stop providing federal aid to the schools. The closures seemed to happen overnight, leaving students looking into the windows and doors of their shuttered schools.

The loan forgiveness will apply to students enrolled at the schools from 2009 to Marinello’s closure, when it operated 56 schools across the country, officials said. Former students will be notified by the federal government if they will see their loans canceled.

Several months after the closure of the schools, an insurer for Marinello agreed to pay $13.5 million to resolve allegations the school manipulated the federal loan program. The Department of Education found students were allowed to repeat the same high school diploma tests until they passed, use their phones to look up answers and took the tests home without supervision.

“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,” U.S. Secretary of Education Miguel Cardona said in a statement. “Today’s announcement will streamline access to debt relief for thousands of borrowers caught up in Marinello’s lies.”