$1 Billion in Fraudulent Student Debt Cancelled for 72,000 Borrowers, Demonstrating Major Policy Shift

Thanks to fearless and tenacious courtroom advocacy by LSC’s Project on Predatory Student Lending, in March the U.S. Department of Education announced that it would rescind its unlawful and harmful partial relief policy – for the second time – promising to grant full student loan relief to a subset of defrauded student borrowers covered by this policy.

The Department estimates that this will impact 72,000 borrowers and cancel up to $1 billion in fraudulent student loan debt.

The Project on Predatory Student Lending has been leading the fight for justice on behalf of hundreds of thousands of students defrauded by for-profit colleges and this latest policy change is a remarkable achievement, delivering a billion dollars in debt relief to low-income individuals.

But it is only a step.

“Abandoning partial relief is a strong start for a narrow subset of borrowers, but what we need from the Education Department is an overhaul of the current borrower defense process,” said Toby Merrill, the Project’s Director.

People who attended a Corinthian school (Wyotech, Everest, Heald) or ITT Technical Institute and previously received a partial relief decision on their borrower defense application are affected. The Department of Education has not granted borrower defense applications from any other schools.

An additional 170K defrauded students demand relief

An additional 170,000 defrauded students who have applied for borrower defense have had their applications stalled or denied by the Department of Education for years – and LSC’s Project on Predatory Student Lending was back in court on their behalf in late March.

Under federal law, students who attended colleges that misled them have the right to have their federal student loans discharged. But accessing that relief has been nearly impossible.

According to documents the Project obtained from the Department of Education, the Trump-era system that issued assembly-line style rejections of 130,000 claims from borrowers who say schools misled them remains in place.

Relief systematically denied to 90 percent of borrowers

Since December 2019, roughly 90% of borrowers who say they’ve been scammed by their schools have had their applications for student loan relief denied, according to an analysis of government data by the Project.

Some of the borrowers have been waiting since before the Trump administration took office to get a fair and impartial adjudication of their claims.

“I’m certainly hopeful that the new administration will take more seriously the rights of borrowers than the last administration, it’s a pretty low bar,” Merrill told MarketWatch in a recent interview. “Our clients aren’t in a position to stop pushing for that.”


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