As President Biden directs the Education Department to continue implementing and developing targeted student loan forgiveness programs, one group in particular is getting some repeated attention: borrowers who were allegedly harmed by their school.
Under several Biden administration initiatives, hundreds of thousands of borrowers have received, or can apply for, student loan forgiveness based in part on the school that they attended, the institution’s conduct, or the quality of their degree, career training, or certificate program. And a new student debt relief plan currently under development may provide another route to relief for these borrowers.
Here’s an overview.
Group Student Loan Forgiveness For Collapsed For-Profit Chains
The Biden administration has approved group discharges for former students of Corinthian Colleges and ITT Technical Institutes. These were major national chains of for-profit colleges that were accused of widespread misconduct, including false advertising and misrepresentations about career and earnings prospects. The schools closed several years ago following multiple investigations.
The Education Department approved $6 billion in student loan forgiveness for more than half a million former Corinthian students last year, as well as $3.9 billion in student debt relief for at least 200,000 former ITT students. Importantly, this student loan forgiveness is automatic — borrowers did not need to apply in order to qualify. However, due to ongoing backlogs, not all covered borrowers have received student loan forgiveness yet, and discharge processing is ongoing.
Student Loan Forgiveness Under Sweet v. Cardona Settlement
The Education Department is also in the process of implementing student loan forgiveness relief under the Sweet v. Cardona settlement. The settlement resolves a years-long class action lawsuit over stalled or rejected Borrower Defense to Repayment applications. That program allows borrowers to request student loan forgiveness on the basis of certain types of school misconduct. Former students alleged in the suit that the department slow-walked processing of hundreds of thousands of applications, or issued arbitrary denials.
Under the terms of the settlement, more than a quarter million borrowers will receive a discharge of their federal student loan debt if they applied for Borrower Defense relief by June 2022 and attended one of dozens of institutions covered by the settlement. Some of the more well-known schools on the settlement list include DeVry University, the Art Institutes, Ross University School of Medicine, and the University of Phoenix.
Under the settlement, those who submitted Borrower Defense applications between June and November 2022 are not guaranteed student loan forgiveness. But these so-called “post-class” applicants will be entitled to a determination within three years. If the Education Department issues no decision within that timeframe, they could receive automatic loan forgiveness.
New Student Loan Forgiveness Rules For Borrower Defense Program
Other borrowers who believe their school engaged in fraud or misrepresentation can still apply for student loan forgiveness through the Borrower Defense to Repayment program, even if they are not covered by the Sweet settlement.
On July 1, the Biden administration enacted new rules governing the Borrower Defense program designed to expand eligibility for relief. Under these new rules, someone could qualify for student loan forgiveness if their school engaged in substantial misrepresentations or omissions of fact, breached a contract, engaged in aggressive and deceptive recruitment, violated state law, or was the subject of a judgment or agency enforcement action associated with school misconduct.
However, on August 7th, in response to a legal challenge brought by several schools, the Fifth Circuit Court of Appeals enjoined the new Biden administration rules. That legal challenge is still continuing, but in the meantime, the Education Department is prohibited from applying these more favorable regulations. Processing Borrower Defense applications may be slowed or stalled as the legal challenge moves forward. If the Fifth Circuit ultimately overturns the new Borrower Defense rules, older and more restrictive rules that were in place before would go back into effect.
New Biden Student Loan Forgiveness Plan Also May Target Certain School Conduct
The Biden administration is in the process of developing a new student loan forgiveness plan under the Higher Education Act. According to the Education Department, the plan will be targeted to benefit borrowers who fit within five broad categories.
One of those categories are those who attended institutions that “created unreasonable debt loads or provided insufficient earnings for graduates.” Notably, this suggests that borrowers may not have to demonstrate that their school engaged in some sort of misrepresentation or omission of fact, as is the case for the Borrower Defense program. The department could potentially evaluate eligibility based on a school’s compliance with the Biden administration’s new gainful employment regulations, which are designed to “assesses whether programs offered by private for-profit institutions and certificate programs at all types of colleges meet the statutory requirement to prepare students for gainful employment in a recognized occupation.”
The plan could also benefit “borrowers who attended institutions with unacceptably high student loan default rates.”
The new student loan forgiveness program is still in development, and will likely not be available until 2024 or 2025.
Further Student Loan Forgiveness Reading
Student Loan Discharges Approved In Most Cases Under New Bankruptcy Policy, Says Biden Administration
More Jobs Eligible For Student Loan Forgiveness Under Expanded Rules
Student Loan Forgiveness Could Happen If You Graduated In These Years
Didn’t Get A Student Loan Forgiveness Email? 7 Possible Reasons Why