The Biden administration on Tuesday announced $3.9 billion in automatic student loan forgiveness for over 200,000 borrowers through a new initiative to provide relief to borrowers who were defrauded by for-profit schools. Here are the details.
Student Loan Forgiveness for Borrowers Who Attended ITT Technical Institutes
The Biden administration is implementing the nearly $4 billion in student loan forgiveness through a group discharge process under the Borrower Defense to Repayment program. Borrower Defense can provide student loan cancellation for borrowers who were defrauded by their school through false promises or misrepresentations about key elements of a degree or certificate program.
Today’s group discharge announcement will cancel the federal student loan debt for borrowers who attended ITT Technical Institutes (ITT) from January 1, 2005, through its closure in September 2016, according to the Department of Education. ITT was a national chain of for-profit institutions that collapsed in 2016 following allegations of widespread misconduct.
While typically borrowers must submit a formal application to apply for Borrower Defense to Repayment, today’s group discharge will automatically apply to all such ITT borrowers, even if they have not submitted a Borrower Defense application. The action is expected to benefit over 200,000 federal student loan borrowers.
The initiative mirrors a similar group discharge announced in June for borrowers who attended Corinthian Colleges, another national chain of for-profit schools that collapsed under the weight of misconduct allegations. That initiative will cancel $6 billion in student loan debt for over half a million borrowers.
ITT Accused of Widespread Misconduct
The Education Department issued findings in support of the group discharge decision that ITT engaged in a pattern of widespread misconduct.
“ITT engaged in widespread and pervasive misrepresentations related to the ability of students to get a job or transfer credits, and lying about the programmatic accreditation” of certain degree programs, according to the Department of Education. The federal Consumer Financial Protection Bureau (CFPB) had also found that ITT had “pressured its students into taking out high-cost private [student] loans, even though ITT knew most of its students would ultimately default” on them.
“ITT defrauded hundreds of thousands of students, as we identified when I was the director of the Consumer Financial Protection Bureau,” said Federal Student Aid Chief Richard Cordray in a statement on Tuesday. “By delivering the loan relief students deserve, we are giving them the opportunity to resume their educational journey without the unfair burden of student debt they are carrying from a dishonest institution.”
Advocates Praise Student Loan Forgiveness Initiative
Advocacy groups for student loan borrowers praised the Education Department’s actions on Tuesday.
“ITT was a sham institution, and we have the receipts,” said Project on Predatory Student Lending President and Director, Eileen Connor, in a statement. “Every student who attended ITT was impacted by its fraud and now, because of their resolve and perseverance, they will receive the justice they deserve by having their loans canceled. We have been fighting for these students for years, and we want to thank President Biden, Vice President Harris, Secretary Cardona, the Department of Education for recognizing the harm done to these students and canceling their fraudulent debts.”
““The Department of Education has provided long overdue relief to borrowers who were harmed by their schools and have struggled to repay the tens of thousands of dollars they borrowed for an education that often provided little or no value,” said Kyra Taylor, staff attorney at the National Consumer Law Center, in a statement. “The Department’s decision to provide federal loan relief means that these students can finally begin to recover from their experiences at these predatory schools. Today’s decision will transform many of these borrowers’ financial futures.”
Some advocates for borrowers urged the Biden administration to replicate the automatic student loan cancellation for ITT and Corinthian borrowers on a broader scale.
“This latest Education Department announcement of mass relief for for-profit borrowers has implications for the ongoing fight to cancel all student debt,” said the Debt Collective, a debtor’s union advocating for student loan borrowers, in a statement. “Once again, we see that group discharges are both necessary and possible. All future loan cancellation must be automatic, without burdensome application processes and unnecessary red tape.”
Further Student Loan Reading
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If You Went To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do
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