Biden Administration’s Approval Of $5.8 Billion In Automatic Student Loan Cancellation Is ‘Largest In History’
The Biden administration announced on Wednesday that the Education Department has approved billions of dollars in new student loan forgiveness for borrowers defrauded by Corinthian Colleges. The Education Department characterized the action as “the largest single loan discharge the Department has made in history.” The relief will be also be provided automatically for eligible borrowers.
Here are the details.
Student Loan Cancellation For Defrauded Borrowers
The student loan forgiveness announced today is through Borrower Defense to Repayment, a federal student loan cancellation program for borrowers who were defrauded by their school through misrepresentations, false promises, and other fraudulent activity related to key aspects of the educational program such as admissions criteria, transferability of credits, or job prospects.
560,000 federal student loan borrowers who attended Corinthian Colleges — a now-defunct national chain of for-profit institutions that was found to have engaged in widespread misconduct, deception, and other illegal practices — will be eligible for $5.8 billion student loan cancellation under the new initiative, according to the Education Department.
“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,” said U.S. Secretary of Education Miguel Cardona in a statement. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep. While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions – and the corporations that own them – never again get away with such abuse.”
Student Loan Borrower Activists Praise The Initiative
Advocacy groups and student loan borrower activists praised the Biden administration for the move.
“As a former student of the now defunct Corinthian Colleges and one of thousands of students left with huge debt and worthless degrees, the news that the debt for all students defrauded by Corinthian Colleges is finally gone is beyond fantastic,” said Ann Bowers, a former Corinthian student and 2016 Borrower Representative on Defense to Repayment Negotiated Rulemaking in Tennessee, in a statement released by the Debt Collective, a debtor’s union of student loan borrower activists. “Our fight goes on and will not stop until these predatory schools are eliminated.”
The Debt Collective played a key role in raising the issue of for-profit school misconduct on behalf of defrauded Corinthian student loan borrowers, organizing a debt strike in 2015 and demanding group student loan cancellation for student loan borrower victims of Corinthian’s misconduct.
“This is long overdue but it is the right thing to do,” said Thomas Gokey, Co-founder of the Debt Collective, in a statement. “None of this debt would have been cancelled if it hadn’t been for former Corinthian students getting organized and going on a debt strike.”
Student Loan Forgiveness Will Be Provided Automatically
Normally, borrowers seeking relief through Borrower Defense to Repayment would have to submit a formal application, which would then have to be reviewed by Education Department officials. But under the new initiative announced today, former Corinthian students who took out federal student loans will see the relief automatically. According to the Education Department, the $5.8 billion in relief “includes borrowers who have not yet applied for a Borrower Defense discharge, [and] who will have their Corinthian loans discharged without any additional action on their part.”