The Department of Education wiped out more than $500 million in student loans on Wednesday, in the first step toward unblocking a poorly supported aid program for students who had been ripped off by their schools.
For the first time in more than four years, the department approved new grounds for claims through its so-called credit defense program, which saw debt forgiveness for 18,000 applicants enrolled in the ITT Technical Institute, a profitable chain that collapsed abruptly in 2016. allows students who have been scammed by their school to get their federal student loans waived.
The new approvals covered applications from two groups of students: those who participated in the ITT between 2005 and 2016 and said they had been misled about their earning opportunities, and those who participated between January 2007 and October 2014 and said they had been misled about their earning potential. ability to transfer credits to other institutions.
“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” said Education Minister Miguel Cardona.
ITT students who attended during those time frames and were misled but who had not yet filed a defence, can now do so, citing the department’s decisions, and seek to waive their loans, a department representative said.
Eileen Connor, the legal director of the Project on Predatory Student Lending, a group that has won court victories against the borrower defense claims department, praised Wednesday’s announcement but said Mr Cardona had to go further.
“The department needs to address the more than 700,000 borrowers with more than $3 billion in fraudulent debt from ITT,” said Ms. Connor. “We can’t ask these borrowers to wait another day or pay another dollar for federal student loans that should never have been provided in the first place.”
The borrower defense program has been largely at a standstill for the past four years. In January 2017, at the end of the Obama administration, the department granted claims from some students visiting California’s ITT campuses — a move many hopeful applicants saw as a sign of relief to come.
But the emergency response program essentially stopped functioning for much of President Donald J. Trump’s administration. Betsy DeVos, his education secretary, denounced the system as a “free money” giveaway and repeatedly broke the protections it offered. Then, in her final year in office, she dismissed the claims of more than 130,000 borrowers after assessments that lasted just minutes. Tens of thousands more claims languished for years.
Mr Cardona has promised to turn that tide. “Many of these borrowers have waited a long time for help and we have to work quickly to make decisions for those whose claims are still pending,” he said.
Nearly 108,000 applicants who say they have been scammed by their school are still awaiting decisions. The department has not yet announced whether it would take up the thorny issue of revisiting Ms. DeVos’s denials.