Tuesday, October 26, 2021
HomePolicyBiden Cancels $1B in Debt for Students Scammed by for-Profit Colleges

Biden Cancels $1B in Debt for Students Scammed by for-Profit Colleges

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The Biden administration will forgive $1 billion in loan debt for 72,000 student borrowers scammed by private, for-profit colleges, the Department of Education (DoE) announced Thursday.

Borrowers who were defrauded by their schools but who only received partial student loan forgiveness under former Secretary of Education Betsy DeVos’ era will now have their loans fully discharged.

Secretary of Education Miguel Cardona said borrowers harmed by their schools deserve a simplified and fair path to relief. “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,” he explained.

Under President Donald Trump, the department had made it harder for such students to have their student loan debts forgiven. DeVos argued the law was too easy on student borrowers and too costly for taxpayers.

The DoE said Thursday it will roll back the DeVos-led formula used to administer partial relief and adopt “a streamlined path to granting full relief” for students.

What’s in It for Borrowers 

In response to pressure from former students of Corinthian Colleges, a for-profit college chain that misled students regarding degrees and job placements, the Obama administration tried creating a streamlined process for affected borrowers to have their student loan debt discharged.

The DoE is now taking a step forward in the same process. The announcement is the first step in addressing borrower defense applications and there are plans on pursuing re-regulation as well.

Full relief under the new regulations will include 100 percent discharge of federal student loans, reimbursement of any amounts paid on the loans, requests to credit bureaus to remove any related negative credit reporting, and reinstatement of federal student aid eligibility, if applicable.

A backlog of claims that was overlooked or denied by the previous administration will be reviewed now, though how the DoE plans to approach these claims has not been shared yet.

The DoE started out with this new approach on Thursday. Aggrieved borrowers will receive notices over the next few weeks with loan discharges following after that.

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