The Biden administration has overturned a controversial Trump-era program that will result in the cancellation of about $1 billion in student loans for borrowers who were defrauded by their schools.
73,000 people who were considered eligible for relief under former Education Secretary Betsy Devos but only earned partial loan forgiveness after she modified the cancellation calculation will now receive full loan forgiveness as a result of the amendment.
When Secretary of Education Miguel Cardona, who was approved by the Senate earlier this month, announced the move last week, he said, “Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,”
“A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt,” he added.
The move comes as top Democrats continue to urge President Joe Biden to provide more extensive student loan debt relief, which the President has said should be left to Congress.
When large for-profit colleges like Corinthian and ITT Tech were found to have deceived students and were forced to close their doors under federal pressure during the Obama administration, the forgiveness process was streamlined. For example, the schools provided exaggerated job placement figures to prospective students.
If the Department of Education found that their school had committed fraud, students got 100 percent loan repayment at first. However, DeVos altered the formula, resulting in only partial debt relief for qualifying borrowers based on their current earnings.
DeVos caused a huge backlog of over 200,000 borrower protection claims to build up, leaving some people waiting for answers about whether they’re qualified for debt relief under the Trump administration.
DeVos stated unequivocally that she believes the Obama-era rule is “poor policy” since it places taxpayers on the hook for the expense of debt relief without the proper protections in place to decide who is qualified. She attempted to revise the rule, which slowed the processing of applications. Between 2018 and 2019, no applications were processed for around 15 months.
The Biden administration’s reform falls short of advocacy groups’ requests for a more thorough redesign of the program.
“Abandoning partial relief is a good start for a small group of borrowers, but we need an overhaul of the existing borrower defense mechanism from the Education Department,” said Toby Merrill, Director of Harvard’s Project on Predatory Student Lending, which has sued DeVos over the borrower defense rule issues.
The Department of Education described the rule change as a “first move” in resolving borrower defense claims in a press release, adding that it will pursue additional steps.
Senators Chuck Schumer of New York and Elizabeth Warren of Massachusetts have led a coalition of Democrats calling on Vice President Joe Biden to repay $50,000 in federal student loan debt per borrower.
However, Biden, who has stated that he supports canceling $10,000 per creditor, has consistently resisted the pressure, claiming that the government does not forgive debt for people who attended “Harvard, Yale, and Penn.”
He’s also said he thinks Congress should make reforms through legislation, which would make them more difficult to reverse — while White House press secretary Jen Psaki has said the administration is open to considering an executive choice.
