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Foley was born in Bay Ridge, Brooklyn, New York, the son of a lawyer. He graduated from the State University of New York at Buffalo, a flagship school of the SUNY system, in 1978. He continued his education earning an M.F.A in film study and production from the University of Southern California. During his final year there, acclaimed director Hal Ashby noticed his student film when it was projected on the wall during a film-school projection party and urged him to write something for Ashby's newly formed production company. Unfortunately the company went broke before Foley finished writing, but the stamp of approval was enough to get his career started with his first directing gig on the low budget 1984 teen drama Reckless. In his own assessment Foley says “Because Hal Ashby had hired me, I became viable in that weird calculus of Hollywood just because someone else who was respected thought that I was viable”.