About 18,000 borrowers who were scammed by their college will have their federal student loans canceled, amounting to about $ 500 million in relief, the Education Department said on Wednesday.
These borrowers attended the ITT Technical Institute, a for-profit college that collapsed in 2016 over allegations the school used deceptive placement data and other data to trick students into enroll and take out loans for degrees that have proven to be worthless in the job market.
The 18,000 borrowers whose debt will be canceled had filed for relief under the borrower defense rule, which allows borrowers who have attended schools that have misled them to have their federal student loans canceled.
“Many of these borrowers have waited a long time for relief. ”
The ministry said it will notify borrowers that their applications have been approved in the coming weeks.
Education Secretary Miguel Cardona said in a statement announcing the news that the debt forgiveness represented “the Biden-Harris administration’s commitment to standing up for borrowers,” while noting that other former students for-profit companies were still waiting for relief.
“Many of these borrowers have waited a long time for relief, and we must work quickly to make decisions for those whose claims are still outstanding,” Cardona said. “This work also underscores the need for continued accountability so that institutions can never again commit this kind of pervasive deception.”
Wednesday’s announcement represents the latest in a battle dating back to the Obama administration over the plight of for-profit college student loan borrowers accused of fraud.
Earlier this year, the ministry forgave the $ 1 billion debt of 72,000 students attending Corinthian Colleges, another for-profit college that collapsed amid allegations that allegedly misled students .
Last salute of a long battle
But the Biden administration faces pressure to do more; hundreds of thousands of borrowers who have attended schools like ITT and Corinthian are still awaiting responses to their requests for relief. It also happens that the debate continues to rage over whether the Biden administration should write off some or all of the roughly $ 1.7 trillion in outstanding student debt.
Eileen Connor, legal director of Project on Predatory Student Lending, which represents for-profit alumni in litigation, called the ministry’s decision to approve the 18,000 borrower defense claims “a step in the right direction.” in a statement Wednesday.
Still, hundreds of thousands of ITT alumni have an estimated $ 3 billion in debt from the school that “the department must pay off,” Connor said in the statement. “We can’t ask these borrowers to wait another day or pay another dollar for federal student loans that should never have been made in the first place.”
“The ministry is right that ITT has systematically deceived students for over a decade, but we need more from the Ministry of Education and our customers need it fast,” she added.
How the Ministry of Education pays off debt
In order for borrowers to be released from their debt as part of the borrower defense process, the Education Department must review their claim and agree that they have been misled by their school.
Borrower advocates have pushed the agency to pay off debt in batches when it is clear that borrowers who have attended college for a given period have been exposed to the same illegal behavior.
In the case of Wednesday’s announcement, the department said it looked at the evidence and extensive findings the agency had previously made on how ITT presented employment prospects to potential students in California to include college students. wherever they attend school.
The agency found that between 2005 and 2016, ITT made “repeated and significant misrepresentation” to students about the amount of money they could expect to earn after graduation and the types jobs for which they would be hired. Additionally, the Department found that ITT misled prospective students about their ability to transfer credits from school to other colleges.
Evidence was provided by the Consumer Financial Protection Bureau, the Iowa Attorney General’s Office and Veterans Education Success, an organization that works on issues of higher education for veterans.
Carrie Wofford, president of Veterans Education Success, said in a statement that the courage of veterans and whistleblowers enabled the organization to provide evidence to the department.
“So many veterans told us how ITT Tech cheated on them and stole their GI Bill,” Wofford said in the statement.
Evidence echoes previous findings
The agency’s findings echo evidence found elsewhere, including in 1,000 pages of former student testimony submitted by Connor’s organization in connection with ITT’s bankruptcy proceedings.
Dozens of borrowers said in those documents that hiring officials literally laughed after seeing the school on their resumes; others testified that they were luckier when they removed ITT from their resumes.
More than 18,000 former ITT students have already had their private loans canceled thanks to an agreement between the state attorneys general of CFPB and the company that managed student private debt on behalf of the school. Additionally, in 2018, the judge overseeing ITT’s bankruptcy approved a settlement canceling the school’s $ 600 million debt owed to 750,000 former students.
Borrowers said in 1,000 pages of testimonials that hiring managers literally laughed after seeing the school on their resumes.
In the statement released Wednesday, Connor urged the ministry to follow the court’s lead. “The bankruptcy court has recognized that over 700,000 students have been scammed by ITT and are the real creditors,” she wrote.
Borrowers have the right to have their debt canceled in cases where they have been misled by their schools since the 1990s, but the authority was rarely used until 2015 following the fall of Corinthian.
Former students of Corinthian and other for-profit colleges, organized by activists, began flooding the department with requests for debt relief. In response to this pressure, the Obama administration in 2016 created a streamlined process that borrowers could use to request debt cancellation.
Advocates are urging the Biden administration to quickly write off the debt of borrowers who attended schools like Corinthian and ITT.
Under former Education Secretary Betsy DeVos, the ministry increased the burden of proof for borrowers seeking to cancel their debt and implemented a rule that offered some borrowers who turned out to be scammed relief partial of their loan.
Now, advocates are urging the Biden administration to quickly write off the debt of borrowers who attended schools like Corinthian and ITT, saying the evidence is clear that they were misled and entitled to redress under the law.
“It appears the Biden administration really wants to help the people who need to be released,” said Alex Elson, vice president of policy for the National Student Legal Defense Network, an organization that represents student loan borrowers, including former for-profit students. .
“But that makes it all the more baffling that they are so reluctant to use their authority to immediately and automatically help the countless additional borrowers who are still waiting,” Elson added.