Student management

Biden administration to cancel student debt for 200,000 defrauded college borrowers

Nathan Posner/Shutterstock / Nathan Posner/Shutterstock

The Biden administration has said it will forgive federal student loan debts of about 200,000 borrowers who claimed they were defrauded by their schools. The announcement follows a class action settlement filed in federal court on Wednesday.

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The settlement could erase more than $6 billion in student loan debt, Politico reported. It could also mark the end of a long-running lawsuit that has challenged the US Department of Education’s handling of its “borrower defense” law, which gives federal borrowers the right to relief. debt when their colleges mislead or defraud them.

The lawsuit accused the Trump administration, and then the Biden administration, of spending years unlawfully delaying action on applications borrowers filed with the Department of Education for debt relief.

The proposed deal still needs to be approved by a judge. When that happens, the Biden administration would forgive the student loan debts of about 200,000 borrowers who have already filed a claim against one of 50 mostly for-profit colleges. These borrowers would also be reimbursed for payments they have already made under the agreement.

The proposed settlement represents a “momentous” step in the battle to help borrowers fight fraud, according to Eileen Connor, director of the Harvard Law School Project on Predatory Student Loans, which filed the lawsuit.

“This will not only help secure billions of dollars in debt forgiveness for defrauded students, but will map out a borrower defense process that is fair, just and effective for future borrowers,” Connor said in a statement.

Education Secretary Miguel Cardona also applauded the settlement, saying in a statement that it “will provide billions of dollars in automatic relief to approximately 200,000 borrowers and that we believe will resolve the claims of plaintiffs.” in a fair and equitable manner for all parties”.

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The agreement also aims to eliminate the large backlog of borrower defense claims. As Politico noted, the full release of loans for about 200,000 borrowers will wipe out about three-quarters of pending applications. The remaining applications, which concern approximately 68,000 borrowers, must be decided individually by the Ministry of Education.

As part of the agreement, the Biden administration agreed to resolve the remaining claims within six to 30 months, depending on how long a claim is pending.

The deal comes as President Biden considers a broader plan to forgive all or part of federal student loan debt for millions of borrowers. Although an official announcement may not come until July or August, the White House is reportedly leaning towards a $10,000 per borrower cancellation plan, CNBC reported this week.

Meanwhile, Majority Leader Sen. Chuck Schumer (D-New York) said during a roundtable discussion Wednesday with Sen. Elizabeth Warren (D-Massachusetts) and labor leaders that Biden’s mind is “open. to a loan cancellation plan.

Some lawmakers, including Schumer, want Biden to increase the rebate amount to $50,000 per borrower. But they will struggle to convince others to follow them, including Republicans who vehemently oppose any form of federal student loan forgiveness.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has won awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.