WASHINGTON–The Biden administration has reversed a controversial Trump-era policy that will lead to the cancellation of roughly $1-billion in student debt for borrowers who were defrauded by their colleges, according to numerous reports.
The change will deliver full loan forgiveness to 73,000 people who were deemed eligible for the relief under former Education Secretary Betsy Devos but received only partial loan forgiveness after she changed the cancellation calculation, CNN reported.
"Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution's misconduct," said newly confirmed Secretary of Education Miguel Cardona, in announcing the change. "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 of Education said the changed policy provides debt forgiveness to students whose schools defrauded them, a principle known as "borrower defense."
CNN noted the forgiveness process was simplified during the Obama administration, when big for-profit colleges like Corinthian and ITT Tech were found to have misled students and shut their doors under federal pressure. The schools presented prospective students with inflated job placement numbers, for example.
Changed Calculation
“At first, borrowers received 100% loan forgiveness if the Department of Education determined their school had committed fraud,” CNN reported. “But DeVos changed the calculation, resulting in only partial debt relief for eligible borrowers depending on their current incomes.”
Approximately 200,000 borrower defense claims piled up during the process. With DeVos stating she thought the Obama-era rule was “bad policy.”
She sought to rewrite the rule, and stalled processing applications. For about 15 months between 2018 and 2019, zero applications were processed, CNN reported.
CNN further reported the Biden administration's change falls short of a more comprehensive revamp of the program that advocacy groups have been calling for.
In a press release, the Department of Education called the rule change a "first step" in addressing the borrower defense claims and said it would be pursuing additional actions.
Meanwhile, Sen. Chuck Schumer (D-NY) continues to pressure the Biden Administration to cancel $50,000 per-person in student debt as part of a broader relief effort.