The Department of Education announced Wednesday that it forgave $415 million in federal loans as it approved the borrower defense claims of around 16,000 students who attended four for-profit institutions who the students claim deceived them.
This is the latest batch in a string of borrower defense claim approvals that the Biden administration has made over the last year, which outlines the process used by students claiming that they were misled by an institution they chose to attend and were pressured into taking out loans.
The federal student loans were made to students attending Westwood College, ITT Technical Institute, Minnesota School of Business/Globe University, and DeVry University.
According to the Federal Student Aid website, its borrower defense application is for loan borrowers who attended a school that they believe misled them or engaged in other misconduct, or those who can demonstrate that the school violated state law related to the loan or to the educational services provided.
Students do not necessarily have to show that they have been unable to find work or that they completed their school’s program.
The schools are typically for-profit trade and career development schools. The students allege that the colleges made false claims about their job placement rates and transferability of their school credits to other programs or jobs, and in the case of ITT’s nursing program, failed to attain the proper accreditation.
According to the Department of Education, this made it difficult for students to “receive any return on their educational investment.”
The borrower defense process has been in place since the 1990s, but it was used rarely until the Obama administration picked up the pace after popular for-profit group Corinthian Colleges went out of business.
The Trump Department of Education reduced approvals under former Education Secretary Betsy DeVos, whose Education Department issued new rules that overturned the program, increasing a borrower’s burden of proof.
The Trump administration used a methodology often resulted in partial forgiveness, slowing down the process before the Biden administration announced that it would speed up the process again.
In March of last year quickly after coming into office, the Biden administration announced that it would reverse the partial relief formula used over the Trump era, granting full relief under the regulations to borrower defense claims approved to date.
The Department anticipates this change will ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellation.”
This month, the Department said it already identified close to 12,000 cases that had previously been partially approved that it said it would now fully forgive, to the tune of another $284.5 million.
The federal government won’t necessarily get back the money from the schools, even if they still are in business.
The Department said it is “working on new regulations” to improve borrower defense.
Part of that plan is proposing to re-establish a gainful employment regulation to hold career training programs accountable for unaffordable debt and putting in place financial triggers so that the Department has monetary protection against losses, including borrower defense liabilities.
To reach the findings for this week’s approvals, the Department of Education said it worked with the Federal Trade Commission and Attorneys General in Colorado, Illinois, and New Mexico.
