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72,000 Borrowers Will Get $1 Billion In Student Loan Forgiveness - Do You Qualify?

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The U.S. Department of Education announced on Thursday that tens of thousands of student loan borrowers who were defrauded by their schools will receive student loan forgiveness that could total $1 billion.

The relief will be granted under the troubled Borrower Defense to Repayment program. The Obama administration enacted regulations governing this loan forgiveness program in 2016 to provide student debt relief to students who were misled, defrauded, or otherwise harmed by predatory colleges and universities – often, for-profit schools.

Under former Education Secretary Betsy DeVos, however, the Department of Education rewrote the rules governing the Borrower Defense program. New regulations that went into effect on July 1, 2020 substantially weakened the Borrower Defense relief provided to student loan borrowers and increased the burden of proof required to prevail. The Department also instituted a controversial new policy of providing partial (instead of complete) student loan forgiveness for approved BorrowerDefense applications.

Education Secretary Miguel Cardona, who was recently confirmed to replace DeVos, announced the Department’s changed policy regarding Borrower Defense applications. Borrowers will now be eligible to receive complete student loan forgiveness, along with refunds for payments already made, as well as removal of associated negative credit reporting.

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Secretary 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.”

Importantly, the relief will only apply to approximately 72,000 student loan borrowers who attended for-profit schools who were already approved by the Department of Education for Borrower Defense relief. It does not apply to the tens of thousands of additional student loan borrowers who are awaiting a decision, or whose claims were previously denied by the Department. Eligible borrowers should be notified by the Department in the coming weeks.

The policy change also does not impact a recent court decision issued this week regarding the Borrower Defense to Repayment program. That decision largely upheld the stricter regulations enacted for the program under former Secretary DeVos, which increases the burden of proof required for student loan borrowers to have their claims approved, requires that borrowers show they were harmed financially, and narrows the definition of school-related misrepresentations.

To reverse these stricter regulations, the Biden administration could potentially enact new, more borrower-favorable rules in their place. However, this could be a long, drawn-out process, since new regulations must comply with the Administrative Procedures Act and include substantial public input. Secretary Cardona has not expressly indicated whether he will start the process of drafting new regulations.

Alternatively, Congress could pass legislation undoing the current rules and establishing a Borrower Defense regime that makes it easier for student loan borrowers to obtain relief. Congress passed such legislation last year on a bipartisan basis, but the bill was vetoed by President Trump. It is unclear if the bill will be passed again this session.

“Abandoning partial relief is a strong start for a narrow subset of borrowers,” said Toby Merrill, Director of the Project on Predatory Student Lending in a statement. “But what we need from the Education Department is an overhaul of the current borrower defense process.... The previous administration turned borrower defense into a total sham that was rigged to deny claims without any true consideration. The Biden-Harris administration must now address these failings or else perpetuate a system that is stacked against the very students they are supposed to protect.”

Further Reading

Miguel Cardona Confirmed As Education Secretary

Borrowers Face Huge Delays Applying For Student Loan Forgiveness Program

Congress Passes Biden’s Stimulus Bill: 6 Takeaways For Student Loan Borrowers

Stimulus Bill Has This Hidden Student Loan Tax Benefit

Congress Makes Big Change To Income-Based Repayment: What Student Loan Borrowers Should Know

Senate Passes Stimulus Bill With Student Loan Tax Relief — Will It “Pave The Way” To Cancel Student Debt?

Here’s Everyone Who Wants Biden To Cancel Student Loan Debt (It’s A Big List)

Whether Biden Cancels Student Debt Will Depend On These 3 Things

Could These Student Loan Borrowers Be Excluded From Biden’s Forgiveness?

Can Biden Cancel Private Student Loans? 3 Options

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