Education Department cancels $ 500 million debt owed by former ITT students

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The Education Department said on Wednesday it is writing off $ 500 million in student loan debt for some 18,000 borrowers who have attended the ITT Technical Institute.

Officials have added two new claim categories for borrowers defrauded by their schools, the first time new claim categories have been approved under the Deemed Student Aid Program since January 2017. This includes claims from those defrauded by their schools. who attended ITT on their likely employment prospects and transferability. school credits.

“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” Education Secretary Miguel Cardona said in a statement. . “Today’s action is part of the Biden-Harris administration’s continued commitment to standing up for borrowers when their institutions take advantage. Many of these borrowers have waited a long time for relief, and we need to work fast. to make decisions for those whose claims are still pending. “

Cardona said the work carried out by the ministry emphasizes the need for continued accountability so that institutions are not in a position to commit “widespread deception” again. To date, the Department of Education has written off $ 1.5 billion in student loan debt for approximately 90,000 borrowers through the Borrowers Against Repayment program, often referred to as “borrower defense”.

Although this form of debt cancellation has been around for some time, new rules for the borrower defense program were established under the Obama administration to eliminate federal student loan debt for students who were defrauded by their schools. At the time, the problem was gaining national attention with for-profit schools such as Corinthian colleges and ITT technical institutes going bankrupt. The rules were due to go into effect in early 2017, but President Trump’s former Education Secretary Betsy DeVos opposed the program. At one point, DeVos was found in contempt of court after being ordered to stop collecting debts from those who attended Corinthian.

“They are proactive about it,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, who welcomed Wednesday’s announcement. “I think this is a great indication that the ministry is looking to streamline this quite expensive and sometimes difficult process for defrauded borrowers.”

Latest action for former ITT students, just six months after the start of the Biden administration, comes after the Education Department reviewed evidence provided by the Consumer Financial Protection Bureau, the attorney general’s office of Iowa and the Veterans Education Success organization.

The Department of Education at the very end of the Obama administration discovered that there could be a rebate under the borrower’s defense for students who attended ITT in California for credit-based fraud. employment prospects, but this discount is now extended to cover borrowers regardless of where they frequented ITT. According to the department, ITT made “repeated and significant misrepresentation” to students between 2005 and the school’s closure in late 2016 regarding how much students could expect to earn and the jobs they would get after graduation. diploma. Borrowers have repeatedly said that including ITT’s presence on resumes made it more difficult for them to find employment, the department said.

At the same time, the department discovered that ITT had misled students from 2007 to October 2014 about their ability to transfer credits to other institutions. These credits would rarely be transferred and borrowers have done little to keep from progressing in their educational journey, the department said.

“Now, to be clear, anyone who attended ITT between these date windows will not be eligible for this discharge,” Mayotte said. “In fact, you must be hurt by what they did.”

Mayotte notes the interest of defending borrowers and one of the challenges for the future is to ensure that the Ministry of Education can be as proactive as possible without schools falling victim to frivolous claims.

For those approved for a combined debt of around $ 500 million to be eliminated, the Education Department will begin advising borrowers in the coming weeks and plans to act quickly.

The ministry announced in March that it was waiving $ 1 billion in student loan debt to 72,000 borrowers over previously approved borrower defense claims.

Next week, the Education Department will also hold a series of virtual public hearings to receive comments, including on the borrower’s defense. This is their first step in the process of issuing new regulations.


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