Biden administration writes off $5.8 billion in student loan debt for former Corinthian students

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The cancellation amounts to the largest single discharge ever by the Ministry of Education.

Some of Corinthian’s former students were already eligible for debt cancellation, but the new measure will ensure that all borrowers who attended Corinthian’s founding in 1995 until its closure in April 2015 will receive debt relief. their debt.

At its peak in 2010, Corinthian Colleges enrolled over 110,000 students on 105 campuses, including some called Everest, Heald College, or WyoTech. The Ministry of Education found that Corinthian colleges misled prospective students about the possibility of transferring credits and falsified their placement rates.

In 2013, Vice President Kamala Harris – who was then California’s Attorney General – sued Corinthian Colleges, alleging the school engaged in misleading and false advertising and recruiting. The lawsuit sparked further federal and state investigations that ultimately resulted in Corinthian selling most of its campuses in 2014 and closing the others in 2015.

Political pressure to cancel student debt

Wednesday’s announcement is the latest — and most important — step the Biden administration has taken to forgive federal student loan debt for borrowers who have been defrauded by their for-profit colleges. The administration has also facilitated debt relief for lifelong disabled borrowers as well as public sector workers.

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The new announcement brings total student debt forgiveness approved under the Biden administration to $25 billion since January 2021. President Joe Biden has also repeatedly extended the pandemic-related payment pause – most recently moving the expiration date from May 1 to August 31. .

But the administration’s piecemeal approach to canceling student loan debt doesn’t satisfy many other Democrats who have called on Biden to globally cancel up to $50,000 in student loan debt for each of 43 million borrowers.

So far, Biden has resisted that pressure, but has said he is ready to forgive some federal student loan debt. During the election campaign, he proposed canceling a minimum of $10,000 in student debt per person in response to the pandemic, as well as canceling all federal student debt related to college and university undergraduate tuition. public two- and four-year terms for these borrowers. earn up to $125,000 per year.

It is not entirely clear that the president’s executive power allows him to largely erase student debt. Last year, Biden asked attorneys for the Departments of Education and Justice to assess whether he, in fact, had the authority to write off federal student loan debt broadly. The administration did not disclose those findings.

But a September 2020 memo from lawyers at Harvard University’s Legal Services Center and its Predatory Student Loans Project argues that Congress has given the power to broadly cancel federal student debt to the Department of Education through a law known as the Higher Education Act. It gives the Secretary of Education the authority “to create and cancel or modify debt owed under federal student loan programs,” the memo says.

Fraudulent borrowers get relief

The struggle to cancel Corinthian student debt began in 2014, when a group of students joined a group called Debt Collective. They staged the nation’s first student debt strike, refusing to repay their student loans.

Former Corinthian students will now have their remaining federal student loan debt forgiven automatically.

Students who believe they have been defrauded by their college are usually required to file what is called a Borrower’s Defense to the Claim with the Department of Education.

The Biden administration has wiped out a backlog of such claims that built up during the Trump administration. It has now canceled $7.9 billion for 690,000 borrowers whose institutions benefited.

In some cases – such as the action announced on Wednesday – the government has decided that an entire group of pupils who attend a certain school at particular times should be relieved. Advocacy groups say they hope the latest Corinthian action paves the way for future landfills for groups of borrowers.

“This announcement also paves the way for future group-wide discharges for other for-profit schools, including ITT Tech and Art Institute, and full-scale forgiveness of all student debt,” said Thomas Gokey, co-founder of the Debt Collective, in a statement.

This story has been updated with additional information.

CNN’s Nikki Carvajal contributed to this report.

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