On Thursday, the Biden administration announced it would initiate an automatic write-off of $ 1.1 billion in student loans for at least 115,000 borrowers defrauded by their school.
The student loan cancellation initiative will be implemented as part of the Closed-School Discharge program for students attending ITT technical institutes. ITT, a national network of for-profit schools, abruptly shut down in 2016 after investigating potentially widespread violations. The Closed Schools program allows borrowers to obtain forgiveness from eligible federal student loans if they are unable to complete their program of study due to school closures.
According to a Ministry of Education press release, the administration’s actions today “are providing assistance to borrowers whose attendance at ITT coincides with a period during which the institution has widely misrepresented its financial health and misled students into taking unavailable private services. loans that were allegedly issued for grant aid ”.
“For years, ITT has hidden its true financial situation from borrowers, while at the same time luring many of them to take out private loans on deceptive and unaffordable conditions, which could lead to borrowers dropping out of school,” the minister said in a statement. education of Miguel Cardona. “Today’s action is a continuation of the Department’s efforts to improve and use its dedicated lending authority to provide meaningful assistance to student borrowers. At the same time, the lingering costs of correcting wrongdoing by ITT and other predatory institutions further underscore the need for stronger and faster accountability across the entire federal bailout system. ”
Advocates for student loan borrowers praised the Department’s move. “Thanks to Secretary Cardona and President Biden, thousands of former ITT students are finally getting the relief they’ve been lingering for far too long,” Vice President of Student Advocacy Alex Elson said in a statement. “At the same time, there are countless others who have visited other predatory institutions who are still waiting. We hope the Department will continue to implement our recommendations to improve the situation for all of them. ”
It is important to note that this new exemption only applies to borrowers who were unable to obtain a degree due to the closure of the ITT and did not receive a degree elsewhere. It does not apply to borrowers whose schools have closed after graduation. According to the Ministry of Education, borrowers who are eligible for the closed school program and attended a covered facility that was closed between November 1, 2013 and July 1, 2020 will be automatically terminated unless they are admitted to another facility at within three years after school closure. The branch will begin processing automatic discharges in September.
Borrowers who attended ITT schools or other predatory institutions, but received an advanced degree and were not directly affected by the ITT collapse, can still seek assistance through the Borrower Protection to Maturity Program, which provides forgiveness of student loans to borrowers who have been defrauded by their schools. The Biden administration is also working to expand aid through this program, recently announcing that $ 500 Million Additional Student Loan Forgiveness for 18,000 Former ITT Students by program.
Today’s activities of the Department coincide with the beginning a regulatory rewriting process to revise key federal forgiveness and student loan repayment programsincluding a closed school discharge program and borrower protection until maturity.