$150 Million In Student Loan Debt To Be Wiped Away
The Education Department is wiping a whopping $150 million in federal student loans off the books, and has already begun the process of informing thousands of borrowers that they no longer owe the government money because the schools they attended shut their doors.
The loan forgiveness, which was announced earlier this week, applies to about 15,000 borrowers as federal education officials begin to carry out new rules that they fought in court for more than a year over. The department said it began notifying some of the borrowers by email on Friday that their loans would be discharged within the next few months. Any payments that the borrowers made toward a loan will also be refunded, it said.
About half the borrowers attended Corinthian Colleges, a large for-profit chain that went bankrupt in 2015 after a deluge of lawsuits accusing it of predatory recruiting practices and false marketing. The rest attended one of the more than 1,000 other schools that shut down between November 2013, the start date for the automatic-discharge rules, and November 2015.
The new rules require the department to automatically forgive the loans of eligible borrowers three years after their school closed, but students can apply before then. Under the Education Department’s closed school forgiveness program, federal student loan borrowers can apply to have their loans wiped away if they attended a school that closed while they were enrolled, or soon after, and they do not transfer their credits elsewhere.
The program is based on the principle that lenders bear responsibility for ensuring that a loan is sound, and that borrowers shouldn’t be responsible for loans taken out for an education that turned out to be worthless.
Education Secretary Betsy DeVos has said that she intends to rewrite the rules for some of the agency’s debt-forgiveness programs; The soonest those changes could take effect is July 2020.
“The federal government must become a more responsible lender,” Ms. DeVos said, adding that students “need to understand the implications of their decisions.”