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The Department of Education announced Wednesday that nearly 18,000 borrowers who have been scammed by their college will be forgiven on their federal student loans, amounting to nearly $500 million in relief.
Those borrowers attended ITT Polytechnic, a for-profit college that collapsed in 2016 amid allegations that the school used misleading employment data and other data to lure students into enrolling and taking loans for degrees that proved invaluable in the job market.
The 18,000 borrowers whose debt will be forgiven have filed for forgiveness claims under the Borrower’s Defense Act, which allows borrowers who attended schools found to have misled them to forgive their federal student loans.
“Many of these borrowers have waited a long time to get an exemption.” ”
Minister of Education Miguel Cardona
The administration said it will notify borrowers of approval of their claims in the coming weeks.
Education Secretary Miguel Cardona said in a statement that the debt forgiveness represented the “Biden-Harris administration’s commitment to defend borrowers,” noting that former for-profit college students are still waiting for the forgiveness.
“Many of these borrowers have waited too long for an exemption, and we need to act quickly to make decisions for those whose claims are still outstanding,” Cardona said. “This work also underscores the need for continued accountability so that organizations can never commit this type of large-scale deception again.”
Wednesday’s announcement is the latest in the Obama administration’s battle over the fate of student borrowers who attended for-profit colleges accused of fraud.
Earlier this year, the administration canceled $1 billion in debt for 72,000 students who attended Corinthian Colleges, another for-profit college that collapsed amid allegations that it misled students.
The latest barrage in a long battle
But the Biden administration is under pressure to do more. Hundreds of thousands of borrowers who attended schools like ITT and Corinthian are still waiting for answers to their claims seeking relief. The debate also rages on whether the Biden administration should cancel some or nearly all of the $1.7 trillion in outstanding student debt.
Eileen Connor, legal director of the Predatory Student Lending Project, which is representing former for-profit college students in a lawsuit, called the department’s decision to agree to the borrower’s defense claims of 18,000 “a step in the right direction,” in a statement Wednesday.
However, Connor said in the statement that hundreds of thousands of former ITT students have an estimated $3 billion in debt from the school that “the administration needs to address.” “We can’t ask these borrowers to wait another day or pay another dollar for federal student loans that they weren’t supposed to provide in the first place.”
“The department is right that ITT has systematically deceived students for more than a decade, but we need more from the Department of Education and our clients need it fast,” she added.
How does the Department of Education discharge debts?
In order to release borrowers from their debt under the borrower defense process, the Department of Education has to review their claim and agree that they have been misled by their school.
Borrower advocates paid the agency to repay debts in installments when it was apparent that borrowers who attended college during a certain period of time had experienced the same illegal behavior.
In the case of Wednesday’s announcement, the department said it has reviewed evidence and expanded findings previously provided by the agency about the way ITT has portrayed employment prospects for prospective California students to include students wherever they are in school.
The agency found that between 2005 and 2016, ITT made “frequent and significant misrepresentations” to students about how much money they could expect to earn upon graduation and the types of jobs they would be hired for. Additionally, the administration found that ITT misled prospective students about their ability to transfer school credits to other colleges.
The evidence was provided by the Consumer Financial Protection Bureau, the Iowa Attorney General’s Office, and Veterans Education Success, an organization that works on higher education issues for veterans.
Carrie Wofford, president of Veterans Education Success, said in a statement that the courage of veterans and whistleblowers allowed the organization to provide the department with evidence.
“So many veterans have come to us about how ITT Tech cheated them and stole them from the Soldier Act,” Wofford said in the statement.
Evidence echoes previous findings
The agency’s findings echo evidence found elsewhere, including in 1,000 pages of testimony from former students that Connor’s organization provided as part of ITT’s bankruptcy proceedings.
Dozens of borrowers in those documents said hiring managers literally laughed after seeing the school on their resume; Others testified that they had better luck when they removed ITT from their resume.
Private loans to more than 18,000 former ITT students have already been canceled through a deal between CFPB’s attorneys general and the company that manages private student debt on the school’s behalf. Additionally, in 2018, the judge who oversaw ITT’s bankruptcy approved a settlement to cancel $600 million of the school’s 750,000 former student debts.
Borrowers said in 1,000 pages of testimonials that hiring managers literally laughed after seeing the school on their resume. ”
In the statement released Wednesday, Connor urged the administration to follow the court’s lead. “The bankruptcy court has held that all of the over 700,000 students have been deceived by ITT and are the real creditors,” she wrote.
Borrowers have had the right to cancel their debts in cases where they were misled by their schools since the 1990s, but the power was rarely used until 2015 in the aftermath of the Corinthian fall.
Former students at Corinthian and other for-profit colleges, organized by activists, began to flood the department with claims for debt forgiveness. In response to this pressure, the Obama administration created a streamlined process in 2016 that borrowers can use to apply for debt relief.
Advocates are urging the Biden administration to quickly cancel the debts of borrowers who attended schools like Corinthian and ITT. ”
The department, former Education Undersecretary Betsy DeVos, has raised the burden of proof on borrowers seeking debt forgiveness, and implemented a rule providing for certain borrowers found to have been cheated with only partial loan forgiveness.
Now, advocates are urging the Biden administration to quickly cancel the debts of borrowers who attended schools like Corinthian and ITT, saying the evidence is clear that they have been misled and are entitled to relief under the law.
“It looks like the Biden administration really wants to help people deserving of layoffs,” Alex Elson, vice president of policy at the National Student Legal Defense Network, an organization that represents student loan borrowers, including for-profit college students, said in the litigation.
“But this makes it so baffling that they are very reluctant to use their power to help the countless additional borrowers who are still waiting” immediately and automatically, Elson added.
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