The Department of Education Announces $150 Million in Loan Cancellation for Defrauded Students: What Our Partners and Allies Think

Washington, D.C. The Department of Education announced that it intends to cancel around $150 million in student loan debt for nearly 15,000 students who attended now-defunct for-profit colleges. 

These students are receiving loan forgiveness thanks to an Obama-era regulation known as the Borrower Defense rule, which allowed for student loan borrowers to apply for student loan discharges when their schools shutdown due to fraud and abuse. Many of these students attended predatory for-profit collegesmany from Corinthian Colleges and ITT Tech who shut down after they were cut off from receiving federal student aid.

In October 2018, youth and consumer advocacy groups succeeded in stopping Sec. Betsy DeVos from repealing the 2016 Borrower Defense rule and replacing it with a version that would have severely restricted students’ access to loan forgiveness. The Department was also sued regarding its implementation of the 2016 Borrower Defense rulea suit filed by defrauded students represented by our partners at Public Citizen and Harvard’s Project on Predatory Student Lending. In Fall 2018, the federal judge overseeing the case sided with the students and ordered DeVos to enforce the 2016 rule. 

While this is welcome news for the thousands of defrauded student loan borrowers who have been waiting for relief, there are still over 100,000 borrowers who applied for closed school discharges and who are still waiting for their applications to be processed. 

Higher Ed, Not Debt and Generation Progress, with our coalition of student borrower advocates, will continue to fight alongside defrauded student loan borrowers to make sure they receive the relief they are owed.

Here is what we and our partners have to say in response to this latest news:

Full statements accessible via hyperlinks, where available.

Consumer Reports Senior Policy Counsel, Suzanne Martindale

“This is a huge victory for the 15,000 students who were defrauded by Corinthian College and other scandal-ridden schools that closed in recent years. But that’s only a small fraction of the number of borrowers who were saddled with debt after being cheated by predatory for-profit schools. Secretary DeVos should end her efforts to weaken the borrower defense rule and provide all of these students with the relief they deserve.”

Generation Progress Communications Director, Charlotte Hancock

“Yesterday, Betsy DeVos’ Department of Education announced that it will finally comply with a federal judge’s order to eliminate the student loan debt of 15,000 borrowers. The Department’s compliance is a first step towards fairness and accountability. It will also bring much-needed relief to defrauded student loan borrowers. From her first day in office, Betsy DeVos has sought to restrict borrower defense rules that protect borrowers from greedy for-profit colleges. The for-profit industry has lobbied the Secretary to side with them and against borrowers, but a coalition of young people, students, borrowers, veterans, and higher education advocates have fought back against her industry-friendly policies. This ruling shows that Betsy DeVos is yet again on the wrong side of justice. While we welcome the DeVos Department’s compliance with the court order, our coalition will continue to advocate for students and defrauded borrowers until everyone deserving of loan forgiveness is treated fairly.”

Hildreth Institute President, Bob Hildreth

“This news is a small but important step towards justice for 15,000 student borrowers who were defrauded by predatory for-profit colleges taking advantage of our broken student loan system. It’s outrageous that it took a court order to force the Trump Administration and Secretary DeVos to do the right thing and cancel these loans…However, this decision still leaves more than 100,000 students who were defrauded by closed for-profit colleges and continue to struggle under a massive amount of debt.”

National Consumer Law Center Attorney, Abby Shafroth

“This student debt relief has been a long time coming, and is only coming because borrowers and states fought for it and demanded that the Department of Education follow the law. The relief announced so far will apply to eligible student borrowers whose schools closed between November 1, 2013 and December 4, 2015, so some of these borrowers have been burdened for five years with unfair and unnecessary debt for a degree they couldn’t earn…While implementing the closed school relief is a good first step, there is much more the Department needs to do to comply with the court order to fully implement the 2016 borrower defense rule.”

National Student Legal Defense Network President, Aaron Ament

“This appears to be a positive development, but we will continue pressing the Department to ensure that every single eligible borrower receives the full and complete relief they deserve…This automatic discharge rule was put into place because the impact of a school closure is so devastating on students’ plans and careers, and because many borrowers were not aware of the right to request a discharge. If it weren’t for Secretary DeVos’s unlawful delay of the rule in the first place, students would have gotten this relief in 2017 and public interest organizations like [Housing and Economic Rights Advocates] would not have had to divert their limited resources to solve problems caused by this Department.”

Project on Predatory Student Lending Director, Toby Merrill

“The Department’s proposed rules are so fundamentally flawed that no amount of time could put the Department’s proposals on strong legal footing. The Department should just abandon its attempts to deprive students of their rights, and cancel the loans of defrauded student loan borrowers once and for all. In its latest brief, the Department admits that there is no legal barrier to some of the 2016 borrower defense rule’s key legal protections. That rule should be put into place immediately.”

The Institute for College Access & Success President, James Kvaal

“While it shouldn’t take a court order, today’s announcement is welcome news for 15,000 borrowers
whose colleges closed. But these 15,000 borrowers are a small fraction of those eligible for loan
discharges because their schools closed or committed illegal acts. It’s long past time for the Department
of Education to meet its legal obligations to students.”

Young Invincibles Director of Government Affairs, Reid Setzer

“Today is a turning point for thousands of misled and defrauded student loan borrowers whose lives have been on hold as the DeVos Department of Education fought against the relief that is rightfully theirs. These borrowers can now begin the next chapter of their lives without the weight of their illegitimate debt holding them back. This should be just the beginning of student debt relief by the Department. There are roughly 100,000 students around the country who have been misled or defrauded by deceptive schools, and the Department of Education owes each of these borrowers a sense of urgency and transparency in processing their closed school discharge and borrower defense claims. This has been the morally correct thing to do all along, and now it is the Department’s legal obligation to carry it out.”

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