U.S. Education Department to Forgive Federal Loans of Defrauded Students
United States' Education Department will forgive the federal loans of students who were victims of fraud by for-profit universities. The Biden administration has announced that the federal loans of the said students will be fully erased, a movement that is included in reversing the former administration's policy.
ABC News mentioned the Education Department saying that some students were only given partial relief of financial help. The change the current administration will provide will benefit 72,000 borrowers, where all the students have attended for-profit schools or universities. The Education Department furthered that about $1 billion loans will be canceled.
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Federal Loans and Education Department
The cancellation will have to meet certain conditions before fully forgiving the loans. To be eligible for the federal loan forgiveness by the Education Department, a student must have submitted claims that their for-profit colleges or universities have defrauded them. After that, the federal student loans will be canceled through borrower defense, according to a Forbes report.
"Borrowers deserve a simplified and fair path to relief," said Education Secretary Miguel Cardona in a statement. Cordona furthered that this is especially needed by borrowers who have been harmed by the misconduct of the institutions.
Students who have already been paying their loans will also be reimbursed. Negative ratings because of the loan repayments will also be removed by the credit bureaus, according to an Axios report.
Cordona noted that "a close review of these claims and associated evidence" that is submitted by the students or borrowers have been harmed. Cordona added that their department will grant the borrowers a new beginning from their debts.
However, the new policy pushed by the Education Department does not extend to all claims of fraud. The department emphasized that the ones eligible for the cancellation of federal loans are borrowers who have previously approved claims that we're able to receive "less than a full loan discharge." Moreover, the borrowers who were concerned will be notified by the department in the next few weeks.
Federal Loans in the Previous Administration
During the previous administration, former education secretary Betsy DeVos received backlash on how she handled the issue when she appeared before the House Education and Labor Committee.
The Education Department received a class-action lawsuit from the borrowers who challenged the former administration's delays in processing their claims and denials in forgiving their loans. The Education Department remains in the lawsuit up until the present.
DeVos revised the program that tightened the debt forgives during the former administration as Congress tried to turn the tables. However, former President Trump has already vetoed the measure.
"The previous administration turned borrower defense into a total sham that was rigged to deny claims without any true considerations," said the director of Project on Predatory Student Learning, Toby Merill. Merill added that it is now time for the current administration to address these failings.
The Education Department noted that a total of 343,331 applications for relief under borrower defense were filed for the cancellation of federal loans as of February 28. Among these, 61,511 have already been approved and borrowers notified.
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