After a more than year-long delay, the U.S. Department of Education will cancel $150 million in debt owed by defrauded students, the agency announced Dec. 13.
Under borrower protection regulation established under President Barack Obama in 2016, former students or parents of students who took loans for colleges that closed between Nov. 1, 2013, and Dec. 4, 2018 would receive debt forgiveness or receive reimbursement.
The provision, known as the Automatic Closed School Discharge, was part of the Obama administration’s hemming in of for-profit colleges, such as ITT Tech and Corinthian Colleges. Almost half of the 15,000 persons eligible for the debt cancellation attended the latter, which folded in 2015 after being sued by the government for misleading its students, according to CNN.
Those 15,000 students have been forced to wait, however, as Education Secretary Betsy DeVos dragged her feet in implementing the rule, which should have gone into effect in the summer of 2017. In a June statement, DeVos called it: “a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”
A judge in October sided with 19 states and the District of Columbia, however, ruling that the department had to immediately enact the rule.
“This appears to be a positive development, but we will continue pressing the Department to ensure that every single eligible borrower receives the full and complete relief they deserve,” said Aaron Ament, president of the National Student Legal Defense Network, which filed a lawsuit in the matter. “This automatic discharge rule was put into place because the impact of a school closure is so devastating on students’ plans and careers, and because many borrowers were not aware of the right to request a discharge.”
According to data from the Department of Education, almost 48,000 claims, totaling almost $535 million have been awarded to student borrowers seeking loan forgiveness. However, more than 100,000 claims—many from former students of now-defunct for-profit institutions—are still pending.
According to the Department of Education, it began e-mailing students eligible for automatic debt forgiveness on Dec. 14 to begin the process of discharging their loans.
