Just canceled $ 1 billion in student loans for around 72,000 defrauded borrowers

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  • The Department of Education has just said that it is canceling the debt of approximately 72,000 defrauded student borrowers.
  • This reverses a Trump-era policy that granted only partial debt relief to defrauded students.
  • Borrowers are still struggling to repay their debts after for-profit schools close due to scams.
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Although the cancellation of student debt for every American has not been implemented, the debts accumulated by students who have been defrauded by for-profit schools will have their loans canceled in the weeks to come.

In his first major move as President Joe Biden’s education secretary, Miguel Cardona on Thursday reversed a Trump-era policy that only partially provided relief to defrauded students. For-profit institutions that closed years ago, such as Corinthian colleges and ITT technical institutes, violates federal law by persuading their students to take out loans, and Cardona’s new policy will help about 72,000 of those students receive $ 1 billion in loan cancellations.

Eligible borrowers will begin receiving notices in the coming weeks, according to the ministry, and the release of the loans will follow.

“Borrowers deserve a streamlined and fair path to relief when they have been harmed through the fault of their institution,” Cardona said in a declaration. “Careful examination of these claims and the associated evidence has shown that these borrowers have been wronged and we will give them a fresh start with their debt.”

Debt cancellation methodology by former Education Secretary Betsy DeVos compared the median earnings of graduates with debt relief claims to the median earnings of graduates from comparable programs, and the larger the difference, the more the applicant will benefit relief. Cardona said this process did not result in an appropriate determination of remedy and should be set aside.

According to the press release, the full reliefs under the new regulations include:

  • 100% discharge of federal student loans linked to borrowers;
  • A repayment of any amount paid on the loans, if applicable;
  • Requests to credit bureaus to remove any related negative credit reports;
  • And where applicable, a reinstatement of eligibility for federal student assistance.

In 2014, Corinthian Colleges – a for-profit company that enrolled students at more than 100 campuses across the country – declared bankruptcy after a series of student scam investigations. According to a Senate document, the company made expensive private loans to students although it knew in advance that most of them would default, and at its peak, Corinthian made more than $ 500 million through the Pell Grant program.

The education department fined 30 million Corinthian dollars for deceptive students.

Two years later, ITT’s technical institutes closed their doors after a series of fraud-related claims regarding loan disbursements, placements, salaries, etc.

As a result, Senate Democratic Whip Dick Durbin in May, joined by other Democratic lawmakers, unveiled a plan grant full student loan relief to three categories of defrauded students under a COVID-19 relief program. The first two categories were for students attending Corinthian colleges and ITT technical institutes.

“Borrowers have waited for years for the Department to provide them with the relief to which they are legally entitled,” Durbin said in a statement. “These borrowers find it difficult to find jobs and are often unable to support themselves or their families. They are unable to be productive participants in the economy due to the credit crunch and are often prevented from doing so. to finish their studies because of their worthless debt. ”

Although debt relief for defrauded students was not included in the latest pandemic relief program, Durbin and other Democrats praised the Biden administration for providing this assistance to affected students.

“For more than four years, defrauded borrowers and their families have lived under a cloud of education debt that they shouldn’t have to pay off,” said the chairman of the House Education and Labor Committee, Bobby Scott. declaration.

“I applaud the Biden administration for doing the right thing in making these borrowers whole, and I can only imagine the mixture of joy and relief they feel today. This announcement is life changing for tens of thousands of people. people across the country. ”

Read the original article on Business intern

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