Biden administration to cancel $5.8 billion in single largest student loan forgiveness effort ever
The U.S. Department of Education announced Wednesday that it will forgive all remaining debt for over half a million borrowers who attended and were defrauded by any campus owned or operated by Corinthian Colleges, the for-profit education chain that closed in 2015.
This is the department’s largest single student loan discharge ever: An estimated 560,000 borrowers will automatically have their loans, totaling an estimated $5.8 billion, canceled. They don’t have to apply for a borrower defense discharge; the department says it will discharge the loans without “any additional action on their part.”
All students who attended an institution owned by Corinthian Colleges from its founding in 1995 to its closure in 2015 qualify for the forgiveness.
“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” U.S. Secretary of Education Miguel Cardona said in a press release.
According to the Department of Education, Corinthian Colleges misrepresented the employment prospects of graduates, its job placement rates, and the transferability of its credits. In 2016, then California attorney general and current Vice President Kamala Harris won a $1.1 billion judgment against Corinthian for consumer fraud. She has pushed for loan forgiveness for the defrauded students for years.
The Education Department says it will notify students who attended Corinthian of the decision by email soon, and that the actual discharge of the loans will follow in the coming months.
The action comes as President Joe Biden is reportedly debating whether to forgive up to $10,000 in student loan debt for undergraduate borrowers with federal loans. Biden said in April that he would have a decision on wider-scale student loan cancellation “in the next few weeks.” He has not given public information about any decision since then.
Wednesday’s decision is a significant break from the previous presidential administration. Under former President Donald Trump, then Education Secretary Betsy DeVos was held in contempt of court by a federal judge for violating an order to stop collecting student loan payments from the defrauded Corinthian students.
To date, Biden has forgiven more student loan debt than any other president, totaling $25 billion since January 2021, according to the Education Department. All of the forgiveness has been targeted to students who were defrauded or who qualify for debt forgiveness under a program like Public Service Loan Forgiveness.
Other student loan actions taken by the Biden administration include:
- Discharging $5.8 billion in student loan debt for more than 300,000 borrowers who have a “total and permanent disability.”
- Discharging $55.6 million in student loan debt for those who attended troubled schools like Westwood College and the Court Reporting Institute.
- Discharging $238 million in student loan debt for 28,000 borrowers who attended Marinello Schools of Beauty.
- Discharging $415 million in student loan debt for 16,000 borrowers defrauded by DeVry University, Westwood College, ITT Technical Institute, and other institutions.
- Reforms to the Public Service Loan Forgiveness that will help hundreds of thousands of individuals qualify for forgiveness.
- Reforms to the Public Service Loan Forgiveness program and income-based repayment plans that could erase debt of 40,000 borrowers.
- A pledge to bring 7.5 million borrowers out of default when the federal payment pause ends.
- An extension of the federal student loan payment pause through Aug. 31, 2022.
Borrowers who believe they have been misled by their academic institution can submit borrower defense claims through the Education Department, which could lead to debt cancellation.
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