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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Biden’s Education Dept. just hired Elizabeth Warren’s student-loans expert, who studied predatory lending at Harvard

elizabeth warren
Sen. Elizabeth Warren.

  • The Education Dept. just hired Toby Merrill, founder of the Predatory Student Loan Project.
  • Elizabeth Warren cited Merrill’s research saying the president can legally cancel $50,000 in student debt.
  • She was hired as deputy general counsel under Education Sec. Miguel Cardona.
  • See more stories on Insider’s business page.

A new hire at the Education Department is another in the growing number of experts who have fought alongside Massachusetts Sen. Elizabeth Warren to reform the student-loan debt system.

Toby Merrill, founder of the Project of Predatory Student Lending at the Legal Services Center of Harvard Law School, was hired as the Education Department’s Deputy General Counsel in the Office of the General Counsel on Tuesday, according to a press release.

The Project represents low-income student-loan borrowers in predatory lending cases against for-profit schools, and according to its website, Merrill has represented borrowers in cases that resulted in almost $1 billion in student-debt cancellation. Notably, her work has caught the eye of Warren, a prominent Democrat pushing for President Joe Biden to cancel more student debt.

Another Warren ally – Richard Cordray – joined in May as the head of the Federal Student Aid office, and while he has not publicly commented on cancelling student debt, he has, like Merrill, shared much of Warren’s agenda throughout his career.

During her presidential campaign, Warren proposed to direct the Secretary of Education to cancel $50,000 in student debt per person, and Merrill, along with Eileen Connor and Deanne Loonin from the Project, wrote a letter to Warren in 2020 affirming her legal ability to cancel student debt using executive action.

“In assessing your proposal, we have consulted the statutory and regulatory framework governing federal student loan programs administered by the Department of Education, as well as the framework and controlling interpretations of the budgetary structure of these programs,” Merrill, Connor and Loonin write. “We conclude that your proposal calls for a lawful and permissible exercise of the Secretary’s authority under existing law.”

They added that “the power to create debt is generally understood to include the power to cancel it.”

Under the Higher Education Act, as Merrill, Connor, and Loonin explained, Congress gave the Education Secretary the unrestricted authority to create and cancel or modify federal student debt, and although Warren did not win the presidency, she has been urging Biden to follow through on her proposal and provide borrowers with $50,000 of student debt relief.

Whether Biden will use the authority Warren and Merrill believe he has is unclear. Although he campaigned on cancelling $10,000 in student debt, he has said he does not think he has the authority to cancel $50,000 of it, but he has asked the Education and Justice Departments to review his ability to do so.

“It’s time for President Biden to #CancelStudentDebt,” Warren wrote on Twitter. “People need this. Our country needs this. And one of the best ways to create a 21st-century economy is by investing in people who have invested in their own education.”

Do you have a story about trying to cancel student debt? Reach out to Ayelet Sheffey at asheffey@insider.com.

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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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Elizabeth Warren and Chuck Schumer are leading an effort to give student-loan borrowers another 6 months of relief

warren schumer
Senate Majority Leader Chuck Schumer listens as Sen. Elizabeth Warren speaks during a news conference on Capitol Hill on October 20, 2020 in Washington, DC.

  • 64 Democrats sent a letter to Biden urging him to extend the student loan payment pause by 6 months.
  • Led by Elizabeth Warren and Chuck Schumer, they say borrowers are still recovering from the pandemic.
  • Education Sec. Miguel Cardona has hinted at extending the pause but has not said so definitively.
  • See more stories on Insider’s business page.

Borrowers with student loans haven’t had to pay them back through the pandemic, but that pause on payments is set to lift at the end of September. Although Education Secretary Miguel Cardona has hinted at a futher extension of the pause, no details have yet been released.

Sixty-four Democrats want to give borrowers certainty – and an additional six months, at least, free of student-loan payments.

Senate Majority Leader Chuck Schumer, Massachusetts Sen. Elizabeth Warren, Massachusetts Rep. Ayanna Pressley, and Connecticut Rep. Joe Courtney led 60 other Democratic colleagues in sending a letter to President Joe Biden on Wednesday, urging him to extend the student-loan payment pause until March 31, 2022, or until the economy returns to pre-pandemic employment levels, whichever is longer.

The Democrats wrote in the letter, obtained by Insider, that the pause on student-loan payments and interest have provided “essential relief” to borrowers during the pandemic.

“Borrowers have reaped significant benefits from the ongoing payment pause, taking the opportunity to pay down other debt, relieve financial pressures from lost jobs or decreased earnings, and support their families’ need,” the letter said.

But the lawmakers added that the “scheduled resumption of student loan payments in October could create a significant drag on our economic recovery.”

The letter noted that even as the economy is recovering from the pandemic, it is not reaching women and people of color equally. It cited research from Brandeis University that found the median Black borrower owes 95% of their debt twenty years after starting college, compared to only 6% for the median white borrower.

Insider reported last week that women can expect to earn a $35,000 salary right after graduation – not much more than the average female student-debt load, according to the American Association of University Women.

Warren was one of the Democrats that sent a letter to the CEOs of all student-loan servicers on Monday, requesting information on how they are best preparing borrowers to restart loan payments, warning of the “disastrous” consequences of dropping borrowers back into repayment without proper assistance.

Cardona said during a Senate hearing last week that he is continuing to have conversations on extending the payment pause past September, but the Education Department declined to provide further details on those conversations.

This letter is the latest of Democrats’ efforts to protect borrowers. Warren and Schumer are leading the effort to call on Biden to cancel $50,000 in student debt per borrower using his executive powers – that of which the Education and Justice Departments are currently reviewing.

The Democrats also acknowledged those reviews in their letter to Biden and urged their quick completion, but given the fast-approaching expiration of the payment pause, they want Biden to act on extending that first.

“President Biden can and must cancel student debt with the stroke of a pen. We urgently call on him to act,” Pressley said in a statement. “In the interim, extending this payment pause will provide a crucial additional layer of relief for millions of borrowers. We can’t turn our backs on these families as we work toward an equitable economic recovery.”

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Biden’s Education Secretary may have opened the door to further delay in student loan payments past October

Education Secretary Miguel Cardona.
Education Secretary Miguel Cardona.

  • The pause on student loan payments is set to lift at the end of September.
  • Education Secretary Miguel Cardona said conversations are ongoing on whether to extend the pause.
  • He said last month an extension was not “out of the question,” but no further details were provided.
  • See more stories on Insider’s business page.

As one of his first actions in office, President Joe Biden extended the pause on student-loan payments through September to give borrowers financial relief during the pandemic. Education Secretary Miguel Cardona on Wednesday hinted at the possibility of extending the pause even further.

“We are continuing conversations about if that’s the best time,” Cardona told the Senate Appropriations Committee. “No announcements today, but we continue to have those conversations.”

Cardona testified before the Senate committee on Wednesday morning regarding the education components in Biden’s budget proposal, during which he acknowledged the relief that borrowers have received under the student loan payment pause during the pandemic. New Hampshire Sen. Jeanne Shaheen said that payments restarting in October is “a huge concern for borrowers” and stressed the need to provide certainty for them regarding whether the pause will be extended.

The conversations Cardona mentioned have been ongoing since at least May. At an Education Writers Association conference last month, he said extending the payment pause is “not out of the question.”

“Obviously, we’re going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic,” Cardona said. “It’s not out of the question, but at this point it’s September 30.”

He added that with the repayment process, the department would have to work with borrowers “to make sure that we ramp up the communication and the clarity so that it’s smooth as possible.”

“We know that that’s something we’re going to be focusing on as it gets closer,” he said.

Insider recently reported that the Education Department is planning to improve experiences for student-loan borrowers, but it’s currently unclear what such improvements would entail. An Education Department spokesperson told Insider there is not yet a timeline for when improvements will be implemented.

“We recognize for many families that the recovery from this pandemic will come around the same time,” Cardona said during the hearing. “Students are going to be returning to schools, mortgages will have to start being paid, loans will have to start getting paid, so we want to make sure we are sensitive to the needs of the borrowers and aware of the other challenges that they have. We’re going to continue to do as much as we can with our authorities.”

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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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Biden promised to reform a student loan forgiveness program that’s still rejecting 98% of applicants

student loan debt
  • Biden campaigned on fixing the Public Service Loan Forgiveness (PSLF) program.
  • But new Education Dept. data shows the program is still rejecting 98% of borrowers.
  • Experts and lawmakers want Biden to fix the “extraordinary confusion” the program has caused.
  • See more stories on Insider’s business page.

President Joe Biden campaigned on reforming the Public Service Loan Forgiveness (PSLF) program, which has been under fire for years for rejecting the vast majority of applicants.

New Education Department data found that 98% of borrowers are still being rejected from the program.

PSLF allows government and nonprofit employees with federally backed student loans to apply for loan forgiveness after proof of 120 monthly payments under a qualifying repayment plan, but it has an extremely high denial rate. Biden campaigned on fixing it. His campaign website said “Biden will see to it that the existing Public Service Loan Forgiveness Program is fixed, simplified, and actually helps teachers.”

But newly released Education Department data found that 97.9% of borrowers had been rejected from the program as of April of this year for failing to meet the program’s requirements. In 2018, 99% of applicants were rejected. The reasoning the department gave for the high denial rate comes down to borrowers not meeting the 120 qualifying payments, but experts say the program itself is to blame – not borrowers.

“Washington has had almost 14 years to get PSLF right,” Seth Frotman, executive director of the Student Borrower Protection Center, which advocates an end to the student-debt crisis, wrote on Twitter on Monday. “Enough excuses. Enough deflecting. Enough of industry cashing in while borrowers struggle and @usedgov sits at the sidelines. It’s time to restore the promise of PSLF,” he added.

Last month, 56 Democrats sent a letter urging Education Secretary Miguel Cardona to fix the loan forgiveness program to get rid of the “extraordinary confusion” the program has caused borrowers, prompting the high rejection rate.

“After the first round of forgiveness initially became available to PSLF borrowers more than three years ago, approval rates for the program have remained below 2.5%,” the letter said. “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”

A Government Accountability Office report also found that 287 Dept. of Defense personnel had received loan forgiveness as of January 2020, while 5,180, or 94% of DOD borrowers, were denied. Sen. Elizabeth Warren released a statement calling the findings, and PSLF, “nothing short of a disaster.”

Education Secretary Betsy DeVos was even sued multiple times over the program’s high denial rate.

Biden’s Education Department has announced plans to begin working on improving the program. Insider reported last week that Biden’s regulatory agenda includes reviewing PSLF and “plans to look at these regulations for improvements.”

That followed the Education Department’s announcement that it was beginning the process of issuing new higher-education regulations, but no further detail was provided on what the mentioned improvements would look like.

Frotman called on the Education Department to cancel student debt for eligible borrowers who have been rejected form PSLF, writing on Twitter that “it’s time for @usedgov to cancel the debt of public service workers who have paid for 10+ years.”

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Here’s everything Biden has done so far to address the $1.7 trillion student debt crisis

College student graduation
  • Since President Joe Biden took office, he has taken a number of actions to address the $1.7 trillion student debt crisis.
  • They include cancelling debt for borrowers with disabilities and extending the payment pause on loans.
  • Democrats are pushing for Biden to cancel $50,000 in student debt, which he says he is reviewing.
  • See more stories on Insider’s business page.

Forty-five million Americans have a $1.7 trillion student debt burden in the country. And many of them, alongside Democrats and advocates, want President Joe Biden to forgive $50,000 of their debt.

He hasn’t done that yet, but the president has taken steps to lessen the burden and provide relief during the pandemic.

As one of his first actions in office, Biden extended the pause on student loan payments through September, coupled with zero growth in interest, to ensure borrowers suffering financially would not have to worry about paying off their loans. And since then, Education Secretary Miguel Cardona has cancelled student debt for borrowers with disabilities and borrowers defrauded by for-profit schools. He’s also started conducting reviews of student loan forgiveness programs that don’t work as they should.

But Democrats want Biden to do more.

They have been keeping the pressure on the president to cancel $50,000 in student debt per person using his executive authority. And while Biden has expressed hesitancy to do so, Democrats remain adamant that he can, and should, cancel student debt immediately with the flick of a pen.

“Student loan cancellation could occur today,” Massachusetts Sen. Elizabeth Warren told Insider. “The president just needs to sign a piece of paper canceling that debt. It doesn’t take any act of Congress or any amendment to the budget.”

Detailed below is everything Biden has done to date to confront the student debt crisis:

Extended the pause on student loan payments through September

Joe Biden

On his first day in office, Biden asked the Education Department to extend the pause on federal student loan payments through September 30, following Education Secretary Betsy DeVos’ extension on the pause on loan payments through the end of January. 

This was accompanied by a 0% interest rate during that time period.

Director of the National Economic Council Brian Deese said at the time that the extension on loans would to alleviate some of the burdens many households were facing to pay basic expenses, and student debt is often a barrier to putting food on the table.

“In this moment of economic hardship, we want to reduce the burden of these financial trade-offs,” Deese said.

This extension, however did not apply to the more than seven million borrowers with loans held by private companies. 

Asked the Justice Department to review his authority to cancel student debt

department of justice building

In February, White House Press Secretary Jen Psaki told reporters that Biden will ask the Justice Department to review his legal authority to cancel $50,000 in student debt. 

At a CNN town hall in February, Biden said he doesn’t have the executive authority to cancel up to $50,000 in student debt per person, but said he is prepared to cancel $10,000 — something he campaigned on.

However, Insider reported that he has yet to deliver on that campaign promise, and while Biden said he would support legislation brought to him to cancel $10,000 in student debt, Democrats argue that legislation takes too long, and the president can cancel debt immediately using his executive authority.

“We have a lot on our plate, including moving to infrastructure and all kinds of other things,” Warren said in a February press call. “I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”

Biden’s administration has not yet commented on the status of Justice Department’s review.

Cancelled student debt for defrauded borrowers

student loans college graduates

In his first major move as Education Secretary, Cardona on March 18 reversed a Trump-era policy that gave only partial relief to defrauded students.

For-profit institutions that shut down years ago, like Corinthian Colleges and ITT Technical Institutes, were accused of violating federal law by persuading their students to take out loans, and Cardona’s new policy helped approximately 72,000 of those students receive $1 billion in loan cancellation.

“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.”

The debt-cancellation methodology, known as the “borrower defense to repayment” — approved by Education Secretary Betsy DeVos — compared 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.

But compared to a 99.2% approval rate for defrauded 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.

Cardona said that process did not result in appropriate relief determination and needed to be reversed, and a judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness.

Cancelled student debt for borrowers with disabilities

College Graduates Tossing Caps

Two weeks after cancelling some debt for defrauded borrowers, Cardona on March 29 cancelled $1.3 billion of student debt for about 41,000 borrowers with disabilities.

He also waived an Obama-era requirement for those borrowers to submit documentation during a three-year monitoring period to verify that their incomes did not exceed the poverty line.

A 2016 report from the Government Accountability Office found that 98% of reinstated disability discharges occurred because borrowers did not submit the required documentation — not because their incomes were too high.

“Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency,” Cardona said in a statement. “Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork.”

But experts said this action did not make up for the significant number of borrowers who never received loan forgiveness simply due to paperwork.

“Today’s announcement is not cause for celebration but rather for outrage,” Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said in a statement at the time. “It is scandalous that the Department revoked the loan discharges for 41,000 borrowers with total and permanent disabilities due to paperwork issues during a pandemic.”

 

Expanded the scope of the student loan payment pause

student loans debt

Biden’s payments pause on student loans initially only applied to borrowers with federal loans, meaning those with privately-held loans had to continue making payments during the pandemic.

But on March 29, Cardona expanded the scope of that pause to apply to loans under the Federal Family Education Loan (FFEL) Program, which are privately-held. This helped 1.14 million additional borrowers. 

The FFEL Program ended in 2010, but according to Education Department data, 11.2 million borrowers still have outstanding FFEL loans totaling over $248 billion. And while the department acquired some of the outstanding FFEL loans, many are still privately owned and were not affected by the earlier pause on federally owned student loan payments.

According to a press release, any FFEL borrower who made a payment in the past year will have the option to request a refund. 

Asked the Education Department to review his authority to cancel student debt

joe biden

White House Chief of Staff Ron Klain told Politico in April that Biden had asked Cardona to create a memo on the president’s legal authority to forgive $50,000 in student loans per person.

Biden will “look at that legal authority,” Klain said. “He’ll look at the policy issues around that, and he’ll make a decision. He hasn’t made a decision on that either way, and, in fact, he hasn’t yet gotten the memos that he needs to start to focus on that decision.”

The review appears to be ongoing, and the administration has not announced a timeline for when it will be completed. 

 

Started a review of student loan forgiveness programs

student debt graduation

On May 24, the Education Department announced it is beginning the process of issuing new higher education regulations, mainly concerning student debt-forgiveness programs. 

The first step of the process will be through holding hearings in June to receive feedback on “regulations that would address gaps in postsecondary outcomes, such as retention, completion, student loan repayment, and loan default,” according to a press release.

The department will also seek comments on rules regarding student loan forgiveness for borrowers in public service and borrowers with disabilities, among other things.

The main topics the department plans to address concern the methods for forgiving debt for defrauded borrowers and borrowers with disabilities, along with looking into the Public Service Loan Forgiveness (PSLF) program, which has rejected 98% of eligible borrowers. 

Forbes reported that the process to implement new rules could be lengthy, though. After the hearings in June, there will be “negotiated rulemaking,” during which stakeholders meet with the department to review proposed regulations, and it could take a year or longer until changes are implemented. 

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Delaware State University will use Biden’s stimulus to cancel over $700,000 in student debt

Student Debt
  • Delaware State University will cancel over $700,000 in student debt for pandemic financial hardships.
  • This amounts to about $3,276 in cancelation for each eligible students, which encompass recent graduates.
  • The university is using Biden’s stimulus funds to deliver this financial relief to its students.
  • See more stories on Insider’s business page.

Education Secretary Miguel Cardona issued guidance in March allowing colleges and universities to use funds from President Joe Biden’s $1.9 trillion stimulus plan for a variety of student needs, including grants and scholarships.

Delaware State University (DSU) has decided to use those funds to cancel student debt.

On Wednesday, DSU officials announced they would be canceling up to $730,655 in student debt for recently graduated students who faced financial hardships during the pandemic. Antonio Boyle, Vice President for Strategic Enrollment Management, estimated that the average eligible student would qualify for about $3,276 in student debt relief.

“Too many graduates across the country will leave their schools burdened by debt, making it difficult for them to rent an apartment, cover moving costs, or otherwise prepare for their new careers or graduate school,” Boyle said in a statement. “While we know our efforts won’t help with all of their obligations, we all felt it was essential to do our part.”

The university’s president, Tony Allen, noted in the announcement that DSU hasn’t raised its tuition in over six years, it gives every incoming student an iPad or a Macbook, and it’s transitioning its textbooks to less expensive online versions, showing how debt cancelation aligns with the university’s efforts to keep college affordable.

Cardona’s March guidance said that higher education institutions can use stimulus funding for “financial aid grants to dual enrollment, continuing education, non-degree seeking, or non-credit students, as well as to a broad range of students with exceptional needs, such as certain refugees or persons granted asylum,” along with discharging unpaid institutional student debt.

“Many students have had their postsecondary careers turned upside down as they manage their schoolwork while also protecting themselves from this virus,” Cardona said in a statement. “We hope every eligible student takes advantage of these benefits while continuing to focus on their studies.”

While DSU is exercising its authority to forgive institutional debt – debt owed directly to the university, rather than to the government or a private lender – federal student loan debt currently amounts to $1.7 trillion in the US. The Education and Justice Departments are reviewing Biden’s authority to cancel federal debt, but the president has not yet announced a timeline for doing so.

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Biden’s Education Secretary allows undocumented college students to access stimulus funds

GettyImages-dreamers-daca-supreme-court
Advocates for immigrants with Deferred Action for Childhood Arrivals, or DACA, rally in front of the Supreme Court June 15, 2020 in Washington, DC.

  • Education Sec. Miguel Cardona said undocumented and international students can now receive stimulus aid.
  • This lifts a Trump-era policy that banned those students from receiving emergency aid.
  • The top Republican on House Education called it an insult while Senate Education’s top Democrat is relieved.
  • See more stories on Insider’s business page.

President Joe Biden’s $1.9 trillion stimulus package included nearly $36 billion in emergency funding for struggling students, but international and undocumented students were ineligible to receive that aid – until now.

Secretary of Education Miguel Cardona just eliminated that rule.

“The pandemic didn’t discriminate on students,” Cardona said in a press call on Monday. “We know that the final rule will include all students, and we want to make sure that all students have an opportunity to have access to funds to help get them back on track.”

On Tuesday, the Biden administration issued a final rule that revised a Trump-era policy barring international and undocumented students from accessing emergency aid. In June, Trump’s Education Secretary Betsy DeVos had issued a rule stating only those who participate in federal student aid programs can receive stimulus money that shut out undocumented and international students, including those protected under the Deferred Action for Childhood Arrival program, also known as “Dreamers.”

DeVos’ rule also initially barred students who defaulted on student loans and those convicted of minor drug crimes from receiving aid, but that was lifted in January.

Cardona said during the call that the final rule will apply to all three rounds of stimulus funding and will ensure every student who needs it can access aid.

“What this does is really simplify the definition of a student,” Cardona said. “It makes it easier for colleges to administer the program and get the money in the hands of students sooner.”

DeVos’ policy met a number of legal challenges, including an ongoing lawsuit initiated by California Community Colleges that said they have kept millions of dollars received for grants because of DeVos’ limits on who is eligible to receive them.

Rep. Virginia Foxx – the top Republican on the House Education Committee – called it “an insult to every American.”

“President Biden is fueling an immigration crisis, and this final rule exacerbates the emergency at the southern border,” Foxx said in a statement. “I call on elected Democrats to stop swindling law-abiding citizens, put Americans first, and respect the sacrifice of hardworking taxpayers.”

But Chair of the Senate Education Committee Patty Murray said in a statement she was “relieved” Cardona took this step to give every struggling student needed aid.

Separately, the Education Department said in a Tuesday press release that it is now making available $36 billion in grants that will help over 5,000 institutions, including Historically Black Colleges and Universities (HBCUs), Tribally Controlled College or University, and Hispanic Serving Institutions.

“These funds are critical to ensuring that all of our nation’s students – particularly those disproportionately impacted by the COVID-19 pandemic – have the opportunity to enroll, continue their education, graduate, and pursue their careers,” Cardona said in a statement. “With this action, thousands of institutions will be able to provide direct relief to students who need it most, so we can make sure that we not only recover from the pandemic, but also build back even stronger than before.”

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