Biden erases another $55 million in student loan debt

Forgiveness again targeted to those who were duped by for-profit colleges

The U.S. Education Department on Friday announced it will forgive student loans for more than 1,800 borrowers who attended a trio of for-profit colleges that made false recruiting claims and left many students unable to find jobs.

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The Biden administration is erasing more than $55 million in debt for former students of Westwood College, the Marinello Schools of Beauty and the Court Reporting Institute. All three chains have been closed for years after facing accusations of fraud and deception in their advertising.

“The department will continue doing its part to review and approve borrower defense claims quickly and fairly so that borrowers receive the relief that they need and deserve."

- Education Secretary Miguel Cardona

It is another step in the Education Department’s effort to clear a backlog of claims in the borrower defense program, which offers loan forgiveness to students who were defrauded by their schools. Applications piled up when the Trump administration stalled the program while it rewrote the rules, leaving a current backlog of more than 100,000 pending claims.

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“The department will continue doing its part to review and approve borrower defense claims quickly and fairly so that borrowers receive the relief that they need and deserve,” Education Secretary Miguel Cardona said in a statement.

He added that the new round of approvals should “serve as a warning to any institution engaging in similar conduct that this type of misrepresentation is unacceptable.”

Pressure to do more

President Joe Biden remains under pressure from congressional Democrats to implement more widespread student loan forgiveness through executive action, but so far the president has been unwilling to do so.

Student loan forbearance is set to end in the coming months and the resumption in payments and interest that was paused under the 2020 CARES Act, which Biden extended until Oct. 1, means millions of borrowers now face the belt-tightening reality of repayments before the end of the year.

Critics say piecemeal reforms like ones helping defrauded students fall short of having a real impact for most families, and that forgiveness should be expanded to include a wider swath of Americans still struggling in the wake of a financially devastating pandemic.

Student loan forbearance is set to end in the coming months, and the resumption in payments and interest that was paused under the 2020 CARES Act, which Biden extended until Oct. 1, means millions of borrowers now face the belt-tightening reality of repayments before the end of the year.

Biden previously said he supports the idea of forgiving $10,000 per borrower but also has expressed reservations about doing it unilaterally through executive action.

The president also said he would support making community college free and for allowing families who earn $125,000 or less to send their children to state schools for free. He also said he supports eliminating interest payments and expanding debt forgiveness programs for Americans who take public service jobs, such as teaching.

Biden has stopped short of saying he would sign an executive order forgiving $50,000 in student loan debt for millions of Americans.

The resolution calling for $50,000 in debt relief was introduced in February by Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer of New York.

Such a move would cost about $800 billion and deliver 36 million Americans out of debt, according to reports.

The Higher Education Act of 1965 authorizes the U.S. secretary of education to cancel student loans, meaning Biden could order the move, according to Warren and Schumer’s provision. However, Biden didn’t have an appetite for such a unilateral move considering the stakes of hundreds of billions of dollars that would need to be wiped off the books all at once for nearly 40 million people.

“Canceling student loan debt is the single most effective executive action President Biden can take to lift the economic prospects of tens of millions of young Americans,” Warren said recently.

Supporters of the loan cancellation plan say it would spark a wide swath of the economy, including new business, consumer spending, retirement savings, homebuying and other sectors. Critics, however, say the move would only bring a modest bump to economic activity in GDP.

Republicans oppose the move.

The White House has continued to signal that Congress should pass legislation to achieve it as student loan matters typically fall under federal spending set by Congress.

Happening now

Most of the newly approved claims are for former students of Westwood College, which had campuses across the country before its closure in 2015. The chain told students their course could be transferred to other colleges, but that often was not the case, the Education Department said. It left many students stuck starting their college careers all over again after they transferred.

The company also made false claims about a criminal justice program in Illinois, saying graduates could get jobs as police officers in the Chicago area, the department said. But many police agencies didn’t accept credits from Westwood, leaving many graduates to accept minimum wage jobs in other fields.

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About 200 of the loan discharges are for the Marinello Schools of Beauty, which closed in 2016 after the federal government cut off its funding. The college had a history of failing to deliver the education it promised, the department said, in some cases leaving students without instructors for months. As a result, some cosmetology students never learned key skills including how to cut hair, and many had difficulty passing state licensing tests.

The department approved 18 claims from the Court Reporting Institute, which had locations in Washington, California and Idaho before shutting down in 2006. The college was found to have lied about the amount of time required to complete its training to become a court reporter. Only about 6% of students actually ended up graduating, the department found, and those who did took much longer than the college said it would.

Last month, the Biden administration erased student debt for more than 18,000 borrowers of the ITT Technical Institute, another defunct for-profit college. And in March, it cleared $1 billion in debt for former students of ITT and the Corinthian Colleges chain. In total, the administration has granted claims totaling $1.5 billion for nearly 92,000 borrowers.

The borrower defense program is among several targeted for an overhaul by the Biden administration as it seeks to undo Trump-era policies. Former Education Secretary Betsy DeVos issued new rules meant to scale back loan forgiveness, which she said had become too easy to obtain.

DeVos also implemented a new formula that offered only partial loan relief even if claims were granted. Cardona rescinded that formula in March and said all borrowers granted relief would get their loans erased in full. The department held a hearing on the topic last month as it considers changing the rules.

ArLuther Lee of The Atlanta Journal-Constitution contributed to this report.