Student debt wiped for thousands defrauded by for-profit colleges

The Education Department said it was waiving 18,000 loans for borrowers who attended a for-profit college that exaggerated their graduates’ claims of success in finding jobs and in 2016 under the Obama administration. It was closed after suffering several blows.

The United States Department of Education said Wednesday it is wiping out student loans for thousands of borrowers who participated in a for-profit college chain that made exaggerated claims about the success of its graduates in finding jobs.

The Biden administration said it was approving 18,000 loan forgiveness claims from ITT Technical Institute alumni, a chain that was closed in 2016 after the Obama administration dealt with a series of sanctions. The new loan discharge would result in the payment of more than $500m in debt.

The move marks a step forward in an effort to clean up a backlog of claims in the Biden administration’s Borrower Defense program, which offers loan forgiveness to students who were duped by their colleges. Claims piled up during the Trump administration, which halted the program and began processing claims only after a federal court demanded it. Now more than one lakh claims are pending.

Announcing the new action, Education Secretary Miguel Cardona pledged to stand up for students who are betrayed by their schools.

“Our actions today give thousands of borrowers a fresh start and the relief they deserve,” Cardona said in a statement. “Many of these borrowers have waited a long time for relief, and we need to act swiftly to make a decision for those whose claims are still pending.”

It follows another round of debt redemption in March, when the Education Department approved $1bn in federal student loans for 72,000 borrowers. All those claims were from for-profit college alumni.

Lender advocates hailed the new approvals, but called for quick relief for the thousands of other students whose claims are still pending, including many students attending ITT Tech.

“It appears that the Biden administration really wants to help those who have been discharged,” said Alex Elson, vice president of student defense, a Washington legal group. “But what makes it all the more confusing is that they are hesitant to exercise their right to immediately and automatically help countless additional borrowers who are still waiting.”

The borrower defense is one of several education programs targeted for overhaul by the Biden administration as it works to reverse Trump-era policies. Cardona is hosting a series of hearings this month as his agency considers changes to that policy and others.

The program was rarely used until 2015, when the Department of Education received thousands of claims from alumni of Corinthian colleges. The chain of for-profit colleges recently closed after it concluded that it had lied to students about job placement rates.

After the collapse of Corinthian and other beleaguered for-profit colleges, the Obama administration stepped in to make it easier for students to erase debt. But this overhaul was reversed by the Trump administration, which later wrote its own rules that made it harder to get relief. Changing the rules, then Education Secretary Betsy DeVos said that loan waivers have become much easier.

Cardona began breaking DeVos’ rules in March, when he scrapped a formula that allowed the Department of Education to grant only partial debt relief to students whose claims were approved. The borrowers who have been given relief, their loans will now be completed.

Many of ITT Tech’s 18,000 claims were approved after the Department of Education found that the company had lied about graduates’ job prospects. The agency said ITT made “repeated and significant misrepresentations” about its ability to help students get jobs. In fact, many students said it was difficult to find employment when they listed ITT on their resumes, the department said.

Other claims were cleared when the department found that ITT misled students about their ability to transfer course credits to other colleges. Credit was hardly accepted elsewhere, the department said, leaving students with “little or no progress” in their academic careers.

The agency said borrowers would be notified about the approval of their claim in the coming weeks.


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