Alice Green | Aug 6, 2022 | 3
Biden Administration Cancels $6 Billion in Student Debt
The Biden Administration on Wednesday agreed to cancel the federal student loan debt of more than 200,000 people who claimed they had been defrauded or misled by schools.
Earlier in June, the Administration forgave nearly $6 billion in student loans for borrowers who attended any campus owned or operated by Corinthian Colleges Inc. This second announcement represents the end of a 2019 class-action lawsuit filed by plaintiffs who accused the Department of Education (under Presidents Donald Trump and Joe Biden) of intentionally dragging its feet on processing applications for debt relief.
Sweet v. Devos is centered on the Borrower Defense to Repayment Rule (AKA the “BD Rule”), which guarantees debt relief to students who obtain federal loans based on misleading, fraudulent, or illegal acts by schools. Such acts typically relate to admissions, aspects of education programs, career prospects, projected earnings, and transferability of credits.
Schools listed in the agreement include the Art Institutes, DeVry, and ITT Technical Institute.
The proposed settlement (which requires approval from a judge) forgives more than $6 billion in debt, reimburses borrowers for any amount already paid, and eliminates roughly 75% of pending borrower defense claims.
Trump-era Education Secretary Betsy DeVos will not be required to testify as part of the case.
Eileen Connor, director of a Harvard Law School program that brought the suit, described the proposed settlement as “momentous” and claimed it would “deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government.”
Education Secretary Miguel Cardona also lauded the proposal, claiming it would “resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.” What he did not mention is the Department of Education’s refusal to admit wrongdoing.
If the proposed settlement is approved, the Department of Education will be left with roughly 68,000 borrower defense claims, all of which must be handled individually. As part of the proposal, the Biden Administration has promised that all remaining claims will be resolved within 6-30 months (depending on the date the claim was submitted).
The proposal makes no mention of investigating the large-scale misconduct that must have occurred for so many people to claim fraud, nor does it mention how to recoup the massive cost of forgiving loans. And, while the settlement only impacts individuals with active claims, it is possible the Administration will decide to assist students who attended the schools named in the suit but did not submit claims.
Separately, the Biden Administration is considering adding another extension to the pandemic-era pause on student loan repayment, interest, and collections that is scheduled to expire on August 31st. Officials are also toying with the idea of forgiving $10,000 in student loan debt for borrowers who make less than $150,000 per year.
According to CNBC, roughly 25% of the 40 million Americans with student loan debt are behind on payments.
Author’s Note: Apparently Democrats still don’t understand that you can’t just throw money at a problem to make it go away.
It should not be the responsibility of taxpayers to assist naive borrowers who were defrauded by schools. Perhaps the banks who made the loans should be responsible for the charges.