“The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” Cardona said in a statement.
The borrower defense policy allows students who were defrauded by their colleges to seek federal debt relief. The forgiveness process was simplified during the Obama administration when big for-profit colleges like Corinthian Colleges and ITT Technical Institute shuttered.
Former DeVry students get relief
Wednesday’s action marks the first time the Education Department is approving borrower defense claims associated with a currently operating institution: DeVry University. The department estimates that approximately 1,800 former DeVry students are eligible for nearly $72 million in discharges. More borrowers could see relief as the department continues reviewing pending applications.
The Education Department found that DeVry University had misled prospective students from 2008 to 2015, falsely claiming that 90% of its graduates found jobs in their fields of study within six months of graduation — and making the statistic a centerpiece of a national advertising campaign. In reality, the institution’s job placement rate was around 58%, according to the Department of Education. Former students who demonstrate in their borrower defense claims that they had relied on the inflated statistic may be eligible for relief.
The government will seek to recoup the cost of the student loan discharges from the institution.
DeVry University spokeswoman Donna Shaults said in an emailed statement to CNN that “the Department of Education mischaracterizes DeVry’s calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached.”
She also noted that DeVry has a different board and leadership than it did between 2008 and 2015 and “has oriented our whole organization around helping people compete in a complex and changing labor market.”
The Education Department also announced new borrower defense discharges for some former students who attended Westwood College, the nursing program at ITT Technical Institute, the criminal justice programs at Minnesota School of Business/Globe University, Corinthian Colleges and Marinello Schools of Beauty. None of these institutions are currently operating.
More targeted debt relief
Under Cardona, the Education Department has now approved about $16 billion in federal student loan discharges for more than 680,000 borrowers, including the $2 billion in borrower defense claims.
But the actions from the Education Department don’t go far enough for some borrower advocates. There are still tens of thousands of pending borrower defense claims.
“This piecemeal approach barely scratches the surface of President Biden’s borrower defense backlog,” Eileen Connor, director of the Project on Predatory Student Lending, said in a statement Wednesday. The group represents borrowers in an ongoing lawsuit over unprocessed borrower defense claims.
The Biden administration continues to be pressured by key Democratic lawmakers to offer more student debt relief.
Senate Majority Leader Chuck Schumer of New York and Sen. Elizabeth Warren of Massachusetts have repeatedly called on Biden to use executive authority to broadly cancel $50,000 in student loan debt per borrower. The President has so far resisted those calls, despite expressing support for Congress to cancel $10,000 per borrower.
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