Biden has canceled $1.5 billion in student debt for victims of for-profit school fraud

By CNN Newsource

Published July 9, 2021 4:01 AM

By Katie Lobosco, CNN

The Department of Education has canceled a total of $1.5 billion in student loan debt for nearly 92,000 students, who were victims of for-profit college fraud, since President Joe Biden took office.

The current administration has been taking steps to address the backlog of more than 100,000 forgiveness claims left over from the Trump administration. In its latest move, the Department of Education said Friday that it is canceling about $55.6 million, approving claims from 1,800 borrowers who attended either the now-defunct Westwood College, Marinello Schools of Beauty or the Court Reporting Institute.

The announcement comes a month after the Department of Education said it was canceling $500 million in student loan debt for 18,000 former ITT Tech students. In its first big move, the Biden administration said it would cancel $1 billion in student loan debt for about 73,000 defrauded students who were deemed eligible for the relief under former Education Secretary Betsy Devos but received only partial loan forgiveness after she changed the cancellation calculation.

Victims of fraud

Known as Borrower Defense, the policy allows students who were defrauded by their college to seek debt relief. The forgiveness process was simplified during the Obama administration when big for-profit colleges like Corinthian and ITT Tech shuttered.

DeVos made it clear that she thought the rule was “bad policy” that puts taxpayers on the hook for the cost of the debt relief without the right safeguards in place and made changes to limit its reach. The revisions made by DeVos put the rule in limbo throughout the entire Trump administration. For about 15 months between 2018 and 2019, zero applications were processed while the total pending grew at one point to more than 200,000.

The department has since reversed DeVos’ changes under Education Secretary Miguel Cardona.

The Department of Education said Friday that it found that Westwood made widespread misrepresentations about the ability of students to transfer credits and whether its criminal justice program would lead to careers as police officers in Illinois — where law enforcement agencies would not, in fact, accept Westwood credits in their hiring processes.

At Marinello, students were misled about what instruction they would receive, the department said. Between just two to six percent of students graduated from the Court Reporting Institute, where they were often misled about how long it would take to finish the program.

Some Democrats are pushing for broad debt forgiveness

Biden’s efforts on student loan debt haven’t gone far enough for some leaders in the Democratic Party — including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren — who are calling for the broad cancellation of $50,000 per borrower.

Biden has resisted the pressure so far but has said he would support a move by Congress to cancel $10,000 per borrower. A pandemic-related suspension of federal student loan payments, extended by Biden earlier this year, is in place until October.

Biden has also directed Cardona to write a memo on the president’s legal authorities to cancel debt. An executive action that broadly forgives federal student loans would be unprecedented, but a memo from lawyers at Harvard’s Legal Services Center and its Project on Predatory Student Lending says the Department of Education has the power to do so.

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