Biden’s administration just canceled $55.6 million in student debt for people who went to 3 for-profit colleges

college graduation
  • Biden canceled $55.6 million in student debt for borrowers who went to 3 for-profit schools.
  • 1,800 borrowers who went to Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute will receive relief.
  • This brings Biden’s total debt cancellation for defrauded borrowers to $1.5 billion for 92,000 people.
  • See more stories on Insider’s business page.

President Joe Biden’s Education Department on Friday made progress in its promise to reform the student-debt system by canceling student debt for three more groups of defrauded borrowers.

The Education Department announced on Friday that it had approved borrower defense claims from 1,800 borrowers who attended the for-profits Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute, resulting in approximately $55.6 million in relief.

“Today’s announcement continues the U.S. Department of Education’s commitment to standing up for students whose colleges took advantage of them,” Education Secretary Miguel Cardona said in a statement. “The Department will continue doing its part to review and approve borrower defense claims quickly and fairly so that borrowers receive the relief that they need and deserve.”

According to the press release, this is the first time the department has announced approved borrower defense claims for students who attended for-profit institutions other than ITT Technical Institutes, Corinthian Colleges, and American Career Institute since 2017.

The debt-cancellation methodology created under Education Secretary Betsy DeVos, known as the “borrower defense to repayment, compares the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive.

While President Barack Obama’s Administration approved 99.2% of claims by defrauded borrowers, President Trump’s Education Secretary Betsy DeVos denied 99.4% of those filed during her tenure. DeVos’ method ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness; Cardona said that process did not result in appropriate relief determination and needed to be reversed.

With regards to Westwood College, the department found that from 2002 to the college’s closure in 2015, the school misrepresented students’ abilities to transfer credits and misled students in finding appropriate career choices, leaving students “worse off” after attending the school. 1,600 of those students are receiving $53 million in debt relief.

The department also found that Marinello Schools of Beauty “made widespread, substantial misrepresentations” on the type of education they offered, and 200 of those students will receive $2.2 million debt relief, and it found that the Court Reporting Institute misrepresented how long it would take students to complete the program, resulting in 18 of those students receiving $340,000 in debt relief.

This brings total loan cancellation based on borrower defense under Biden to over $1.5 billion for nearly 92,000 borrowers.

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The Education Dept. insists you repay all your student loans but isn’t collecting about $1 billion owed by colleges, report finds

college graduates
  • The National Student Legal Defense Network found 1,300 colleges owe $1.2 billion to the Education Dept.
  • Most of it is held for-profit colleges that shut down in past years over allegations of fraud.
  • Meanwhile, the department is preparing to resume student loan collections in October.
  • See more stories on Insider’s business page.

Once the payment pause on student loans lifts in October, the Education Department will resume efforts to collect student debt from 43 million borrowers across the country. But according to a new report, collection of debt held by higher education institutions – and owed to taxpayers – doesn’t appear to get similar treatment.

The nonprofit National Student Legal Defense Network released a report last week that found as of February 2021, nearly 1,300 higher education institutions owed approximately $1.2 billion to the Education Department. Most of the debt is held by for-profit schools, with the largest outstanding debt of over $244 billion owed by the defunct Vatterott College.

“While the Department aggressively attempts to collect from borrowers, institutions and their owners and executives walked away from more than a billion dollars owed to taxpayers,” the report said.

The report noted that even thought the department has a “wide array” of methods to require institutions to repay their debt, it has failed to make use of those tools, allowing debt to go uncollected.

Department of Education Press Secretary Kelly Leon told Insider in a statement that the department “is committed to improving our policies and practices to better hold institutions accountable for their actions and to provide borrowers with fair and streamlined access to the benefits to which they are entitled.”

Here are the other main findings from the report, obtained by the group through Freedom of Information Act requests:

  • About 200 of the 1,300 institutions with debt still received Title IV funding from the government;
  • The department has recertified institutions owing debt for participation in student aid programs;
  • And the department’s failure to collect has cost at least $218 million because the statue of limitations on collections had expired.

The report added that the department has not collected relatively small debt amounts. For example, the for-profit University of the Rockies owed $883,613 in 2019 that the department had not collected as of the data collected in the report.

President Joe Biden’s Education Department has begun to act on fraudulent behavior of for-profit schools through cancelling student debt for some defrauded borrowers. Most recently, Education Secretary Miguel Cardona cancelled student debt for 18,000 borrowers defrauded by now-defunct ITT Technical Institutes, totaling to about $500 million in debt relief.

But even as institutions still owe taxpayers billions in debt, the Education Department is preparing to transition borrowers back into repayment in October – something lawmakers have advocates are strongly urging against.

“When we organize together, fight together, and persist together, we win together,” Massachusetts Sen. Elizabeth Warren wrote on Twitter on Sunday. “We’ve all got to raise our voices and call on the Biden administration to extend the pause on student loan payments and #CancelStudentDebt.”

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Biden’s Education Department just cancelled $500 million of student debt for 18,000 defrauded borrowers

1024px ITT_Technical_Institute_campus_Canton_Michigan.JPG
The ITT Technical Institute campus in Canton, Michigan.

  • The Education Dept. cancelled student debt for 18,000 borrowers defrauded by ITT Technical Institutes.
  • ITT Tech shut down in 2016 amid accusations it persuaded students to take out loans they couldn’t repay.
  • 90,000 defrauded borrowers have now received debt relief under Biden totaling $1.5 million.
  • See more stories on Insider’s business page.

As one of his first actions as Education Secretary, Miguel Cardona cancelled student debt for about 72,000 borrowers defrauded by for-profit schools. On Wednesday, 18,000 more got student-debt relief.

The Education Department announced in a press release that it had approved 18,000 borrower defense to repayment claims for borrowers who attended ITT Technical Institutes – a for-profit school that shut down in 2016 amid accusations of false advertising that persuaded borrowers to take out student loans. Those borrowers will get 100% of their student debt forgiven, totaling approximately $500 million in relief.

“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” Cardona said in a statement.

He continued: “Today’s action is part of the Biden-Harris Administration’s continued commitment to stand up for borrowers when their institutions take advantage of them. Many of these borrowers have waited a long time for relief, and we need to work swiftly to render decisions for those whose claims are still pending. This work also emphasizes the need for ongoing accountability so that institutions will never be able to commit this kind of widespread deception again.”

The department will begin notifying borrowers of their approvals for loan forgiveness in the coming weeks and will work quickly to discharge those borrowers’ loan balances.

Issues with borrower defense claims

Former Education Secretary Betsy DeVos approved a debt-cancellation methodology during the Trump administration known as the “borrower defense to repayment” to give defrauded borrowers student debt relief. It compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs, and the bigger the difference, the more relief the applicant would receive.

But compared to a 99.2% approval rate for defrauded claims filed under former President Barack Obama, DeVos oversaw a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student-debt forgiveness. A judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness.

The press release said that Wednesday’s actions bring total student loan cancellation under borrower defense by the Biden administration t0 $1.5 million for around 90,000 borrowers.

ITT Tech’s shutdown

In March, Insider reported on five of the biggest for-profit schools that were accused of defrauding their students, with ITT Tech being one of them.

The Securities and Exchange Commission had taken ITT to court in 2015 for deceiving investors about high rates of late payment and defaults on student loans, and in 2016, the government cut off ITT’s access to millions of dollars in federal loans and grants. The institution shut down shortly afterward, ending its 50-year history.

The Education Department’s recently released regulatory agenda includes amending the borrower defense to repayment, but a department spokesperson told Insider it does not yet have a timeline for when those amendments will be implemented.

The spokesperson said: “The Administration is committed to ensuring borrowers are able to access the loan relief to which they are entitled, and we look forward to working with the field to design and implement much-needed improvements.”

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Trump’s billionaire education secretary is accused of denying student-loan forgiveness to thousands. Now she’ll testify over it.

Betsy DeVos
Betsy DeVos.

  • A judge ruled Betsy DeVos must testify in a case brought on by 160,000 defrauded students.
  • The students claim DeVos mishandled a program to forgive loans for students defrauded by for-profit schools.
  • Under Obama, the program had a 99.2% approval rate, but under DeVos, 99.4% of applicants were denied.
  • See more stories on Insider’s business page.

As Education Secretary under President Donald Trump, Betsy DeVos was tasked with overseeing the loan forgiveness program for students defrauded by for-profit schools. But thousands of those students claim they didn’t get the relief they deserved and have sued DeVos for her mishandling of the program.

A judge just ruled that DeVos has to testify in court about it.

The Biden administration didn’t want this to happen. In February, it joined DeVos in fighting a subpoena to testify in the lawsuit filed by about 160,000 defrauded students, arguing it was an “extraordinary request.” But on Wednesday, Judge William Alsup wrote in a 12-page ruling that her testimony was warranted given the “sparse” documentation of DeVos’ reasoning for rejecting borrowers’ claims.

“Even assuming Secretary DeVos retains some measure of executive prerogative, she must answer an appropriately issued subpoena,” Alsup wrote in the ruling. “Judicial process runs even to unwilling executives.”

Over the past decade, several for-profit schools have shut down over investigations claiming the schools engaged in fraudulent behavior related to federal loans. Corinthian Colleges and ITT Technical Institutes were two of the biggest schools accused of violating federal law by persuading their students to take out loans they could not pay back. They both shut down, as did other for-profit companies, such as Education Corporation of America.

DeVos, an heir to the AmWay fortune and member of one of America’s richest families, per Forbes, oversaw the “borrower defense to repayment” program to forgive debt for eligible defrauded borrowers, but the program massively failed. Compared to a 99.2% approval rate for claims filed under President Barack Obama, DeVos had a 99.4% denial rate for borrowers, and ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness.

Under DeVos, the program began to compare the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs, and the bigger the difference, the more relief the applicant would receive.

The high denial rate alarmed lawmakers, advocates, and borrowers who wanted student debt relief but weren’t getting any, and as Alsup said in his ruling, DeVos did not provide a sufficient explanation as to why so few claims were processed.

In March, Biden’s Education Secretary Miguel Cardona canceled $1 billion in student debt for about 72,000 defrauded borrowers and said in a statement that DeVos’ methodology for giving defrauded students debt relief had been ineffective and needed to be reversed.

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said in a statement. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”

Critics of DeVos’ appointment had argued that her financial ties were a conflict of interest, as she never sold her multimillion-dollar stake in Neurocore, a “brain training” program for children. She is also a longtime advocate of “school choice,” or vouchers that enable parents to send their children to private schools instead of public ones.

DeVos has separately asked the Georgia-based 11th Circuit Court of Appeals to block the subpoena. Alsup has scheduled a hearing for June 3.

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