Student loans

The Biden administration is canceling $5.8 billion in student loans. More borrowers could see relief soon

The U.S. Department of Education has canceled about $5.8 billion in outstanding student loans for more than 560,000 borrowers in the government’s largest loan forgiveness action to date, the department announcement Wednesday.

The cancellation applies to anyone who attended schools operated by the now-defunct Corinthian Colleges, one of the largest for-profit education companies that filed for Chapter 11 bankruptcy in 2015.

Corinthian Colleges has faced several lawsuits since its founding in 1995 – but perhaps the most notable came in 2013, when Vice President Kamala Harris sued Corinthian while she was California Attorney General for “misleading advertising and deception and recruiting” among other allegations, according to the department.

“Starting today, every student deceived, defrauded, and indebted by Corinthian colleges can be assured that the Biden-Harris administration has their back and will repay their federal student loans,” the U.S. Secretary of Education said. Miguel Cardona, in a statement. statement.

Eligible borrowers also won’t need to complete the application to receive the relief: it will be automatic and they should be notified within weeks, the department said.

Wednesday’s news comes as the Biden administration considers broader student loan forgiveness for millions of borrowers – so far the administration has approved $25 billion in loan forgiveness for about 1.3 million borrowers.

While some politicians and economists hailed the move as a step in the right direction to solving the $1.7 trillion student debt crisis, millions of borrowers have yet to see relief and wonder when and whether their loans will be cancelled.

Here’s what to expect with the cancellation of student loans in the coming months:

Federal student loan pause likely to be extended through end of 2022

White House officials are focused on forgiving $10,000 for all borrowers who earn less than $150,000 a year, CNBC reports, but the administration has yet to confirm those plans.

In April, the Department of Education extended the pause on student loan repayment, interest and collections until August 31, 2022, but Michelle Dimino, senior education policy officer at Third Way, predicts that the payment break will be further extended until the end. of the year, at least until after the midterm elections.

A recent survey from Data for Progress and Rise found this voters could be less likely to vote midterm if the Biden administration fails to provide adequate relief to borrowers.

Cardona and other senior Biden officials have also made it clear that they are comfortable with extending the break during interviews. “We will continue to monitor him,” Cardona said. Cox Media Group in April. “Right now we have August 31 and as you’ve seen in the past, we’ve been comfortable moving that date around if necessary.”

More borrowers could see relief sooner

In the meantime, however, Dimino expects more defrauded borrowers to see their debt forgiven or reduced soon, especially those who have pending defense claims or who are eligible for debt relief. release of closed school loanmeaning your school closed while you were enrolled or you were unable to complete your program due to the closure.

“The only thing we can expect from this administration at this point, and are doing, is a continued and concerted effort to help borrowers who are having the most difficulty and to provide targeted assistance,” adds Dimino. “The Department of Education is really rushing to clear this backlog of defrauded borrowers and give them the relief they deserve.”

Check:

With student loan repayments frozen until May, here’s how to use that money for a financial reset

If you hate budgeting, try the 80/20 rule to save money without tracking every expense

Despite high-profile job cuts, labor market remains ‘hot’ for workers

Register now: Be smarter about your money and your career with our weekly newsletter