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Biden Administration Cancels $6 Billion in Student Debt

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.

Sources:

Biden Administration agrees to cancel student debt of 200K borrowers who say they were defrauded 

President Biden’s decision on student loan forgiveness is coming soon – what that could mean for borrowers 

264,000 Borrowers Will Get $6 Billion in Student Loan Forgiveness In ‘Landmark’ Settlement Agreement With Biden Administration 

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4 Comments

  1. Howard

    Absolutely a crime if you create a debt you pay for it
    If the government pays for it then they own it

  2. LMS

    So nice that I can work two jobs and worked to get a scholarship and still paid off $200k in student loans so I could pay for some slacker to pay off their debt. Biden Dumb F! Pay me back my money then you A Hole!
    I really HATE Democrats and liberals. They are like syphilis you can’t get rid of them!

  3. Wallace

    Socialism at work. I sure as hell ain’t expecting to get out of paying my way. Grants and no interest loans would be ok. But why shouldn’t people pay their way in life? If you can’t pay for college don’t go. Get into the trades a get hands dirty and blistered. It would build character. Which liberals know nothing about.

  4. frank stetson

    I am not an advocate for buying down people’s loans with taxpayer dollars. I paid for part of mine, paid kids worth in full, and think it unfair to get a free ride unless grant, scholarship, etc. I agree with Wallace, not on his stupid socialism comment, but on using interest canceling, extensions, negotiated payment plans — before a complete cancel. But, if you write this stuff, please skip the fluff, quit the huff n puff and do the work to discover the truth. This is not about student default, this is about a settlement for a fraud perpetrated by the colleges to get students who needed loans to pay for the fraud. And if they didn’t get the sheepskin because of fraud, someone should be responsible to cover the $$$.

    You say: “Apparently Democrats still don’t understand that you can’t just throw money at a problem to make it go away.” That’s some chutzpah coming from a Trumpian responsible for the ‘hugest” free money printing in US history resulting in the largest US deficits and largest debt ever in US history all brought to you by the Republican party and Mr. Businessman, Donald J. Trump. Yeah, it was a great economy fueled mostly by Trump free money. Trump’s GDP growth was lackluster, manufacturing employment growth – lackluster, coal did not come back, oil peaked and then went down, but lots of free money. Stimulus for all, tax cuts for the rich and business with less for the rest. Yes, we had full employment but wage growth was nonexistent until the end when State minimum wage hikes kicked in for minimum wage not Trump’s economy. Yea, Trump gave us more minimum wage jobs, great. Like everything Trump, his economy is a con job made possible by printing vast amounts of free money. Some balls to say Dems are throwing money as if they own tossing money away.

    “It should not be the responsibility of taxpayers to assist naïve borrowers who were defrauded by schools. Perhaps the banks who made the loans should be responsible for the charges.” If a Republican feels that being cheated is the victim’s problem, then why so upset about the 1.6.2021 insurrectionists? Aren’t they just naïve protestors who were defrauded by Trump’s Big Lie? Why even suggest pardons? I don’t think it will ever be the lenders problem, unless the Federal government wrote that into the Federal aspect of this. I do agree that it should the college’s problem since they are the ones cheating but can you blame the student’s for going after the deepest pockets?

    I would like to see people pay their own debts. But making fraud a victim’s issue seems as unfair as saying only the Dems toss money at problems. If you want to talk victims who didn’t deserve a hand, taxpayers bailed out Billionaire liar Donald J. Trump for a billion bucks so far; he even stiffed Puerto Rico for $30M but tossed out some taxpayer funded t-shirts, Trump’s version of socialism for disaster victims. Fraud victims in the case of Trump’s 6 bankruptcies also include those who lost jobs, savings, investments. They should not be victims just for working with Trump, but that’s on top of the taxpayer loss and each of them will need to sue on their own or class action together. Do you blame those victims too Alice? All six times?

    But let’s cut to the chase, something that Alice struggles with apparently in her zeal to cut n paste. The reason that the government is covering the debt is a class-action suit against the government based on the Government’s own Borrowers Defense Rule, a Federal Government Rule for Federal Student Loans where the college cheats. Many of these “colleges” can be defunct. The Federal Government is then free to go after the funds from the college, or whatever is left.

    As Trump would say, the law is the law, and the case follows the law and that law says the Federal Government, who owns the program, should pay. The courts agree, finally. It’s legal Alice, just like Trump not paying taxes when he makes billions.

    The Borrows Defense Rule, or the concept of, was first established in 1994, under Bill Clinton, under the Higher Education Act which directed the agency to establish rules to protect students from collegian fraud. It was weak and basically tossed the issue to the States where the Fed was faced with 50 different responses. That’s not fair either. In 2015, the Corinthian College fraud went national and affected over half a million student loans. In 2016, a new rule was established by the Obama Administration in response to the collapse where: “The rule would ban colleges from enforcing arbitration provisions of enrollment agreements. And it could make it easier for many student borrowers to receive loan forgiveness. But those benefits will also depend on how the Education Department, which has sought for the past two years to roll back the regulations, carries out provisions of the rule.”
    Trump’s useful idiot, Betsy Devos, looked to stop the rule, did that, finally got shot down in court, but tightened the rule during the reign of Trump basically denying all. “In 2016, DeVos announced her intention to rewrite the Obama-era rule, arguing that it was too lenient and has instead pitched partial loan forgiveness. The Trump administration stopped processing the claims shortly thereafter and has since been sued several times by student advocacy groups for inaction.” This was not fair either, IMO.

    The current move by the Biden administration goes back closer to the Obama rule which, again, was to cover students who took Federal loans who were defrauded by schools in the Federal loan program, and may be defunct too. The Fed can then pursue the culprits to the Fed loan program for taxpayer restitution. That was the intent of the 1994 established rule that was accepted, modified, by so many Congresses, Republican and Democrat controlled, over the decades.

    That story is a little thicker than just a bunch of deadbeats looking for a free ride and, once again, I think both parties have some ownership, although it’s primarily a Democratic initiative. Truth is often messy. In all cases, one should never blame the victim for the perpetrator’s actions. Hope that clarifies things.

    https://www.insidehighered.com/news/2018/10/17/more-year-later-obama-student-loan-rule-takes-effect

    https://www.usnews.com/news/education-news/articles/2019-08-30/betsy-devos-issues-final-student-loan-borrower-defense-rules

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