Statement: Education Department offers relief to students defrauded by for-profit colleges

New Secretary Cardona to forgive loans for some borrowers whose schools shut down

WASHINGTON — The Biden administration announced Thursday that the U.S. Department of Education is taking executive action to improve its borrower defense program. That move will result in about $1 billion in full student loan forgiveness for 72,000 Americans who were defrauded by predatory for-profit colleges. 

After major for-profit chains such as Corinthian Colleges (2015) and ITT Tech (2016) closed with no warning to their students, the Education Department, student advocacy groups, colleges, lenders and other stakeholders created a process called “borrower defense to repayment,” whereby affected students could get some or all of their loans forgiven if they were unable to complete their education. Under the leadership of former Education Secretary Betsy DeVos, however, the processing of borrower defense claims ground to a halt and many students who did get approval were given little to no forgiveness on their balances.

U.S. PIRG’s Higher Education Campaign Director Kaitlyn Vitez issued the following statement in response:

“We applaud the quick action taken by the new leadership of the Department of Education to protect struggling borrowers in this moment of crisis. Students who were unable to complete their education at one of these closed for-profit colleges faced two insurmountable challenges: a heavy debt burden and an incomplete degree, leaving them unable to find good-paying work to pay back their loans. In the years since their schools shut down, these students have been hounded by debt collectors while former Education Secretary Betsy DeVos created delay after delay in granting debt cancellation that they were entitled to. 

We’re thankful for Secretary Cardona for giving these students a fresh start by providing the full amount of relief they deserve. However, the economic fallout of the COVID-19 pandemic, on top of the longstanding challenges that student loan borrowers face, means that millions more students will need assistance when the freeze on federal loan repayment is lifted. On top of further efforts to improve the borrower defense system, we urge the secretary and his team to fix loan repayment programs such as Public Service Loan Forgiveness and income-driven repayment so that more borrowers can leave the pandemic in better financial standing than they entered it.”