Biden Administration Expected to Cancel $1 Billion in Debt for Students Defrauded by For-Profit Colleges

By Victor Omondi

On Thursday, the Department of Education reported that debtors who were defrauded by their schools but who only got an incomplete consolation from their student-loan debt under the Betsy DeVosera Department of Education will have their loans fully cancelled. This is a move that will lead to an approximated $1 billion in debt relief.

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Secretary of Education Miguel Cardona said in a statement. “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.”

Besides canceling these borrowers’ debts, the Department will also compensate debtors for any relevant repayments made so far.

Under DeVos, the Department raised the burden of proof for borrowers seeking loan cancellation under the law and executed the partial relief rule.

On Thursday, the agency reported that it will no longer use the partial rule to assess the amount of relief debtors are eligible to receive.

Borrower advocates have requested the agency to do more. The Department is still being charged by a class of 200,000 previous for-profit college students whose claims for loan relief have been obstructed or rejected.

Although the lawsuit concerns actions taken under the former administration, Toby Merrill, the director of the Project on Predatory Student Lending, narrated that her clients are still waiting for consolation and “aren’t in a position to stop pushing for that.”

“What we’ve seen over time is that the rights of student loan borrowers are not self-enforcing, and they never have been,” Merrill said, adding that debtors have had to seek court redress and elsewhere for the enforcement of their rights.

The Biden-era Department of Education revealed that the report was the first step in conveying debtor defense appeals and that the department is also planning to pursue re-regulation.

According to the senior Department official, there is a pile of claims in addition to claims that were rejected by the former administration that the department plans to evaluate but didn’t readily have any reports about the agency’s plans with regards to those claims.