About $1 billion in student loan debt will be forgiven because of a new Department of Education policy that fully forgives student loans for borrowers defrauded by private, for-profit colleges, scrapping widely criticized criteria introduced by former Secretary of Education Betsy DeVos that limited relief.
Borrowers who submitted claims that their for-profit colleges defrauded them will be eligible for their federal student loans to be fully canceled through borrower defense.
The change will affect about 72,000 borrowers who mostly attended now-defunct ITT Technical Institute and Corinthian Colleges.
Some of these students were granted partial loan forgiveness under the Trump administration’s policy.
“A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt,” Education Secretary Miguel Cardona said.
Former Education Secretary Betsy DeVos created a complicated formula for fraud claims that based relief on comparisons of incomes of students who claimed their school defrauded them to those who went to similar programs. It resulted in the denial of relief to many borrowers and small amounts for some whose claims of being defrauded were found to be valid. The Obama administration had a similar policy to the Biden administration’s that allowed full loan forgiveness.
In 2019, DeVos testified before the House Education and Labor Committee that the Obama administration’s interpretation of borrower defense was “weaponized borrower defense against schools that they didn’t like.” The Department of Education was sued in a class-action lawsuit by borrowers who challenged the administration’s delays in processing their claims and denials to forgive their loans. The department remains in the lawsuit today.
What To Watch For
The new policy doesn’t necessarily extend to all claims of fraud. In a press release from the Education Department, the department says, “This includes borrowers with previously approved claims that received less than a full loan discharge.” Affected borrowers should receive information from the Education Department over “the next several weeks” in order to receive their loan forgiveness.
Biden administration backs DeVos in fight over testifying about loan forgiveness (POLITICO)
Betsy DeVos Overruled Education Dept. Findings On Defrauded Student Borrowers (NPR)
72,000 Borrowers Will Get $1 Billion In Student Loan Forgiveness – Do You Qualify? (Forbes)