Biden administration cancels another $3.9 billion in student loan debt
Aug 16, 2022, 10:40 AM | Updated: Aug 23, 2022, 11:11 am
(Photo by Susan Goldman/Bloomberg via Getty Images)
(CNN) — The Department of Education said Tuesday that it will cancel $3.9 billion in student loan debt for 208,000 students who attended the now-defunct for-profit ITT Technical Institute — bringing the total amount of loan discharges approved under President Joe Biden to nearly $32 billion.
Some former ITT Tech students were already eligible for debt cancellation, but now the department will automatically cancel all remaining federal student loan debt that borrowers took on to attend the school from January 1, 2005, through its closure in September 2016.
ITT Tech shut down shortly after the government pulled the plug on its federal funding because it had failed to show it was in compliance with certain accreditation standards. At the time, the school was the subject of several state and federal probes over its recruitment tactics, lending practices and job placement figures.
“It is time for student borrowers to stop shouldering the burden from ITT’s years of lies and false promises,” said Secretary of Education Miguel Cardona in a statement Tuesday.
“The evidence shows that for years, ITT’s leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause,” he added.
Who is eligible for student debt relief?
Former ITT Tech students with federal student loans are eligible for the cancellation even if they have not previously applied for relief under the Department of Education’s borrower defense to repayment program, which offers cancellation to those who can show they have been defrauded or misled by their colleges.
There may be some former ITT Tech students with outstanding debt who are not eligible because they attended the school prior to January 2005.
It’s unclear how quickly borrowers will be notified about whether their debt will be canceled. The Department of Education first needs to notify a borrower’s student loan servicer before the cancellation is processed.
On a call with reporters Tuesday, department officials would not give an exact timeline for ITT Tech students. But some former Corinthian College students, who were granted debt relief in June, have already seen their debt canceled, said Federal Student Aid Chief Richard Cordray.
He added that eligible ITT Tech borrowers will not have to pay anything more on their loans even if the pandemic-related pause on payments expires before they receive full cancellation. The federal loans borrowed to attend ITT Tech will remain in forbearance.
The Department of Education also announced Tuesday that it has formally notified DeVry University that it is required to pay millions of dollars for previously approved student debt cancellations for about 1,800 of its students. DeVry University is still operating and the government wants to recoup the cost of the student loan discharges from the institution. It is difficult for the government to get money back from colleges like ITT Tech that have already shut their doors, Cordray said.
DeVry University has received the notice and is reviewing it, according to a statement the school sent to CNN Tuesday.
“We continue to believe the Department mischaracterizes DeVry’s calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached,” it read.
Biden weighs broad student debt cancellation
Biden is expected to announce by the end of August whether he will more broadly cancel student loan debt for the 43 million federal student loan borrowers.
Key Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have been calling on Biden to cancel $50,000 per borrower. But Biden has consistently pushed back on canceling that much and has suggested he would support wiping away $10,000 per borrower, in line with a pledge he made on the campaign trail in 2020.
Until now, Biden has taken a more targeted approach to student debt relief. His administration has authorized the cancellation of nearly $32 billion so far — more than any other administration — largely for borrowers who were defrauded by their for-profit colleges and for permanently disabled borrowers.
He has also temporarily expanded the Public Service Loan Forgiveness program that forgives the debt of government and nonprofit workers after 10 years of payments, and made changes to the income-driven repayment plans, bringing millions of borrowers closer to forgiveness.
Biden has also extended the pandemic-related pause on federal student loan payments several times. Borrower balances have effectively been frozen for more than two years, with no payments required on most federal student loans since March 2020 — when the coronavirus pandemic sent many Americans into lockdown. During this time, interest stopped accumulating and collections on defaulted debt have been on hold.
The pause is set to expire on August 31, but Biden has yet to decide whether he will extend it again.
Americans’ attitudes toward student debt relief are sharply divided along partisan and generational lines.
A majority of Democrats in a May CNN poll (56%) — and an even wider majority of self-described liberals (69%) — say the government is doing too little on student loan debt, while only a third of Republicans and self-described conservatives alike say the same.
This story has been updated with additional information.
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