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Biden Admin Reinstates Forgiveness of Student Loans Caused by Fraud

Tens of thousands of borrowers who attended for-profit schools like Corinthian Colleges and ITT Technical Institute that defrauded students will have their student loan debts eliminated after the Education Department rescinded some changes made during the Trump administration that gutted a relief program, the New York Times reported. “Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Miguel Cardona, the education secretary. “We will grant them a fresh start from their debt.” The change will eliminate around $1 billion in student loan debt owed by around 72,000 borrowers, the department said. Most of them attended ITT and Corinthian, institutions that abruptly shut down years ago. The relief program, known as borrower defense, allows those who can demonstrate that they were substantially misled by their school to have their federal student loans forgiven. Once little-used, the system was flooded with claims during the Obama administration after a series of large for-profit chains collapsed following a government crackdown on schools that saddled their students with high debts for a low-quality education. For a time, the department granted any borrower with an approved claim a full discharge of their debts. But that changed under Betsy DeVos, the previous education secretary, who described the program as a “free money” giveaway. In 2019, DeVos imposed a complicated new methodology that led to only partial relief for many successful applicants. Some whose claims were approved were told they would get $0 in relief. Cardona said the department will abandon DeVos’s methodology and retroactively give those with approved claims a full discharge.
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