The U.S. Department of Education said it has scrapped a Trump-era policy in order to fully erase federal student loan debt for borrowers who claim they didn’t receive the kind of college education they were promised.
The change, according to the newly-confirmed Education Secretary Miguel Cardona, is expected to ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellation.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said in a Mar. 18 press release. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”
The decision applies to students who already had their claims approved and received only partial relief, according to the release.
In its latest move to address mounting student loan forgiveness requests, the Education Department overturned former Education Secretary Betsy DeVos’s 2019 rewriting of the Obama-era standards for loan forgiveness for students who claim to be defrauded by for-profit schools, such as the now-defunct education chain, Corinthian Colleges.
The original Obama “borrower defense” rule in 2016 adopted a rather broad definition of “fraud” in college education, allowing students to apply to have their loans wiped out if they thought the school they went to failed to deliver the education it promised.
DeVos, saying it was too generous with taxpayer money, rewrote the borrower defense rule in 2019 and directed the Education Department to calculate how much the students who claimed they were defrauded benefited from their education and how much of their debt, if any, could be discharged. The calculation is based on a complex formula that compares the median salary of the students to those of students who attended similar programs at other schools. The students would receive relief if their earnings were at a deficit.
Under the new methodology, most allegedly defrauded borrowers only qualify for partial relief.
This overhauled system, according to DeVos, “treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm.” The Education Department at that time estimated it could save taxpayers $1.1 billion over a 10-year span.
House Democrats voted to overturn DeVos’s changes in March 2020, but it was vetoed by President Donald Trump, who called it a “misguided resolution” that would undermine American students’ ability to make choices about their education. With only six Republicans joining them, the Democrats were unable to secure the two-thirds majority needed to override the presidential veto.