One Year Later, Defrauded Student Loan Borrowers Are Still Waiting for Forgiveness

Education expense or student loan for post secondary education concept : Dollar bag, graduation cap on row of coins on a table, depicts loan or money designed to help students pay for associated fees.
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The Biden administration has approved $14.5 billion in discharges for nearly 1.1 million borrowers who were defrauded by their colleges, since it has been in office, according to the Department of Education. Yet, only 53,000 of them had their debts cleared to date, The Washington Post reports.

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“At this rate, it’ll take the department 40 years — until the 2060s — to provide all the relief students are owed,” Libby DeBlasio Webster, senior counsel at National Student Legal Defense Network, told The Washington Post. “By that point, many of those students will have children and grandchildren of their own.”

The Washington Post reports that the delays are caused by several reasons, including that it took a long time for the department’s Federal Student Aid office to create a system for canceling that many loans. In addition, as the Biden administration launched several debt relief programs, its efforts were redirected to these newer efforts.

This year, the department announced five group discharges, including the automatic cancellation of loans held by former students of defunct for-profit chains Corinthian Colleges and ITT Technical Institutes, according to The Washington Post.

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Indeed, on June 1, the administration announced it would cancel $5.8 billion in student debt for 560,000 borrowers who attended Corinthian Colleges (Corinthian) — the largest single loan discharge the Department of Education has made in history, according to a press release.

“In the last year, the administration has announced about a half dozen massive and unplanned new programs and they have been regularly and unexpectedly reprioritizing everyone’s work efforts every time there is a new press release,” Scott Buchanan, executive director of the Student Loan Servicing Alliance, told The Washington Post. “Since Congress never provided any funding for these new programs, everyone at FSA and the servicers are working together to shift limited staff and IT resources to whatever is the current administration priority.”

The Hill reported that earlier this month, 750,000 borrowers, who attended Corinthian Colleges, ITT Technical Institutes and Marinello Schools of Beauty, were told their borrower defense applications were approved and being processed.

“The borrowers were also told they will need to contact their loan servicer to see if they are eligible for a full refund on previous payments,” according to The Hill. “However, it is still unclear when the thousands of borrowers still waiting for relief will see it.”

Indeed, on Nov. 16, the Secretary of Education reached a settlement with a class of student-loan borrowers whose complaint alleges that, for years, the Department of Education “unlawfully delayed processing, or perfunctorily denied, hundreds of thousands of “borrower defense” applications.

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Jude Alsup wrote in his decision that the borrower-defense program set up by Congress “has devolved into an impossible quagmire.”

“As of now, approximately 443,000 borrowers have pending borrower-defense applications. That is a staggering number. If, hypothetically, the Department’s Borrower Defense Unit had all 33 of its claim adjudicators working 40 hours a week, 52 weeks a year (no holidays or vacation), with each claim adjudicator processing two claims per day, it would take the Department more than twenty-five years to get through the backlog,” he wrote.

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Secretary of Education Miguel Cardona said the department was pleased with the decision.

“Going forward, the Department of Education will continue to strengthen oversight and enforcement for colleges that mislead students and work to uphold the Biden-Harris Administration’s commitment to helping students who have been harmed,” he said in a statement.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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