The Biden administration announced it is rescinding a Trump administration rule that only gave partial relief to borrowers defrauded by for-profit institutions. The decision could affect 72,000 borrowers who received less than complete relief under the Trump-era formula and grant them a combined $1 billion in canceled loans.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Secretary of Education Miguel Cardona. “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.”
The department said that in addition to removing the Trump-era formula, it also plans to implement “a streamlined path to receiving full loan discharges.” This move is what the department called a “first step,” as it will grant full relief to individuals approved for loan cancelation under Trump who were only given partial relief.
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Not only will the students have their loans canceled so they don’t have to make future payments, but they will also be reimbursed for any payments they made on the loans and will again become eligible for federal student aid. And the Education Department will also have credit bureaus remove any negative marks on borrowers’ credit reports related to the loans.
While the Obama administration made it possible for students defrauded by for-profit colleges to secure complete loan relief starting in 2015, Trump’s education secretary, Betsy DeVos — a friend of the for-profit education industry who had investments in a student-debt collection agency — changed the rules to make it harder for borrowers to get that relief. And even if they were approved for relief, it was only partial.
A group of more than 20 state attorneys general filed suit against the Trump administration over the new rule, claiming DeVos violated federal policy by not justifying the rule change and making it harder for defrauded students to gain loan forgiveness. And in March 2020, Congress attempted to overturn the changes DeVos made, but then-president Trump vetoed the bill. But the rule remained until now.
“For more than four years, defrauded borrowers and their families have lived under a cloud of education debt that they should not have to repay,” House Committee on Education and Labor Chairman Bobby Scott (D-Va.) said of the bill. “I applaud the Biden administration for doing the right thing by making these borrowers whole, and I can only imagine the mixture of joy and relief they are feeling today. This announcement is life-changing for tens of thousands of people across the country.”
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