Student loan debt: Department of Education writes off $415 million for victims of fraud

This is the latest effort by the Biden administration to forgive student loan debt for borrowers who may already be eligible for debt relief but are still waiting for their documents to be processed. The agency has eaten up a backlog forgiveness applications left behind by the Trump administration that had been filed under a policy known as borrower defense to repayment.
Under the direction of US Secretary of Education Miguel Cardona, the department has canceled approximately $2 billion in borrower defense claims from more than 107,000 people to date.

“The Department remains committed to granting discharges to borrowers when evidence shows their college has violated the law and standards,” Cardona said in a statement.

The Borrower Defense Policy allows students who have been defrauded by their colleges to apply for federal debt relief. The forgiveness process was simplified under the Obama administration when large, for-profit colleges like Corinthian Colleges and ITT Technical Institute closed.

But the department stopped processing borrower defense requests for months under former education secretary Betsy DeVos, who made it clear she believed the rule was ‘bad policy’ that put taxpayers on the line. the account of the cost of debt relief without the right collateral in place.

Former DeVry students are relieved

Wednesday’s action marks the first time the Education Department has approved borrower defense claims associated with a currently operating institution: DeVry University. The department estimates that about 1,800 former DeVry students are eligible for nearly $72 million in landfills. More borrowers could see relief as the department continues to review pending applications.

The Department of Education found that DeVry University misled prospective students from 2008 to 2015, falsely claiming that 90% of its graduates found jobs in their field of study within six months of graduation. of their degree – and making this statistic the centerpiece of a national advertising campaign. In fact, the school’s placement rate was around 58%, according to the Ministry of Education. Ex-students protesting in defense of borrowers say they had relying on the inflated statistic may qualify for relief.

The government will seek to recover the cost of student loan cancellations from the institution.

DeVry University spokeswoman Donna Shaults said in a statement emailed to CNN that “the Department of Education is misrepresenting DeVry’s calculation and disclosure of graduate results in certain advertisements, and we disagree with the conclusions they have reached”.

She also noted that DeVry has a different board and leadership than it had between 2008 and 2015 and “has steered our entire organization to help people compete in a complex and changing job market.”

The Education Department also announced new borrower defense waivers for certain former students who attended Westwood College, the ITT Technical Institute nursing program, Minnesota School of Business criminal justice programs /Globe University, Corinthian Colleges and Marinello Schools of Beauty. None of these institutions are currently functioning.

More targeted debt relief

Under Cardona, the Department of Education has now approved about $16 billion in federal student loan releases for more than 680,000 borrowers, including $2 billion in borrower defense claims.

It canceled $7.8 billion for more than 400,000 borrowers unable to work due to permanent disability. It reached borrowers who were already eligible for relief by automatically identifying them through a Social Security Administration data match.
The department also revised the Public Service Loan Forgiveness Program that forgives outstanding federal student loan debt for those working in the public sector after making 10 years of payments. The Biden administration has temporarily expanded the eligibility criteria so that they now apply to borrowers who have older loans that weren’t originally eligible as well as those who were in the wrong loan plan. reimbursement but who fulfilled the other conditions. These changes provided nearly $5 billion in debt relief for 70,000 borrowers.

But the Education Department’s actions don’t go far enough for some borrower advocates. There are still tens of thousands of borrower defense applications pending.

“This piecemeal approach barely scratches the surface of President Biden’s borrower defense backlog,” Eileen Connor, director of the Predatory Student Loans Project, said in a statement Wednesday. The group is representing borrowers in an ongoing lawsuit regarding outstanding borrower defense claims.

The Biden administration continues to come under pressure from key Democratic lawmakers to offer more student debt relief.

Senate Majority Leader Chuck Schumer of New York and Sen. Elizabeth Warren of Massachusetts have repeatedly called on Biden to use executive power to write off $50,000 in student loan debt globally per borrower. The president has so far resisted those calls, though he has voiced support for Congress to write off $10,000 per borrower.

Department of Education officials say the agency has already written off more student debt than any previous administration. It also extended the pandemic-related pause on federal student loan payments that has been in place since March 2020. It is now set to expire on May 1.

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