Biden cancels $37 million in student loan debt for former University of Phoenix students

By Katie Lobosco, CNN

Washington (CNN) — The Biden administration is canceling nearly $37 million of federal student loan debt for more than 1,200 borrowers who attended the University of Phoenix because it found that the for-profit school misled students about job prospects.

Taking a narrower approach to student debt forgiveness, the Biden administration has continued to cancel some borrowers’ debts under existing programs after the Supreme Court blocked its broad student loan forgiveness program that promised to forgive up to $20,000 for low- and middle-income borrowers.

Similar to Wednesday’s announcement about the University of Phoenix, the Department of Education canceled $72 million in federal student loan debt in August for more than 2,300 borrowers who attended the for-profit Ashford University in California.

Altogether, the administration has canceled more than $117 billion of the nearly $1.7 trillion of outstanding federal student loan debt since 2021.

The former University of Phoenix students now eligible for debt relief were enrolled at the school between September 21, 2012, and December 31, 2014, and have already applied for loan forgiveness under a program called borrower defense to repayment. The program has been in place for decades and allows people to apply for debt relief if they believe their college misled or defrauded them.

Building on an investigation by the Federal Trade Commission, the Department of Education found that the University of Phoenix falsely represented that its partnerships with thousands of corporations, including Fortune 500 companies, would give students hiring preferences.

In 2019, the FTC reached a settlement agreement with the University of Phoenix over similar claims. The company did not admit to or deny any allegations at that time.

“The University of Phoenix brazenly deceived prospective students with false ads to get them to enroll,” said Federal Student Aid chief operating officer Richard Cordray in a statement.

“Students who trusted the school and wanted to better their lives through education ended up with mounds of debt and useless degrees,” he added.

In a statement sent to CNN Wednesday, the University of Phoenix refuted the government’s findings and noted that the school admitted no wrongdoing when settling with the FTC in 2019.

“We respectfully, but adamantly disagree with the U.S. Department of Education’s allegations related to the Dec. 2019 University of Phoenix settlement with the Federal Trade Commission,” it said.

“While the University is not against relief for borrowers who have valid claims, we intend to vigorously challenge each frivolous allegation and suspicious claim through every available legal avenue,” it added.

The Department of Education said it will notify eligible borrowers by early October that their debt relief applications have been approved. The government will instruct student loan servicers to put affected borrowers’ loans in forbearance until the debt is officially canceled.

Borrowers whose loans are in forbearance won’t be required to make payments, even after the pandemic-related freeze on federal student loan payments ends in October.

Other former University of Phoenix students who believe they were similarly affected during those years can still apply for student debt relief under the borrower defense program at the Federal Student Aid website.

The Biden administration has made it easier for borrowers to apply for federal student loan forgiveness from a variety of existing programs. It expanded eligibility for the Public Service Loan Forgiveness program, which wipes away outstanding debt for public sector workers after they make 10 years of qualifying payments, and is conducting a one-time account adjustment that will result in the cancellation of debt for borrowers who have been paying for at least 20 years.

In August, the administration also launched a new income-driven repayment plan, known as SAVE (Saving on a Valuable Education), which will reduce monthly payments and the amount paid back over time for eligible student loan borrowers.

This story has been updated with additional information.

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