Activists just wiped out nearly $16 million in private student loans for students who attended a now-defunct for-profit college

Activists just wiped out nearly $16 million in private student loans for students who attended a now-defunct for-profit college
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  • The Debt Collective erased $16 million in private student loans for former Vista College students.

  • For-profit Vista shut down last year and was put on notice by the FTC for potential fraud.

  • Activists believe the students might qualify for federal debt relief if they can prove wrongdoing.

Students who attended a now defunct for-profit college just got a million-dollar gift.

On Friday, the Debt Collective — a debtor's union pushing for abolishment of all forms of debt — announced its sister organization, the Rolling Jubilee Fund bought, and wiped out, $16 million in private student loans for over 7,000 former students that attended Vista College. Vista was a for-profit school based in El Paso, Texas that declared bankruptcy and shut down last year, and it was included in the list of schools the Federal Trade Commission put on notice for allegedly making false claims to students regarding earnings and job potential post-graduation.

"We bought the private student loan listed above and canceled it," the group wrote in a letter it is sending to students, informing them of the private student-loan relief. "You no longer owe the balance of this debt. You do not need to pay us, nor should you pay anyone else for this debt—it is gone!"

Thomas Gokey, legal and policy director at the Debt Collective, told Insider the group's efforts are "about more than just the private student loans we purchased and abolished," which were owed to the college. The Debt Collective is planning to file a group-wide borrower defense to repayment claim on behalf of the students, which is federal student-loan relief provided to borrowers who prove they were defrauded by a for-profit school.

While there are currently no findings of fraud committed by Vista College, the Debt Collective is asking students to complete a survey regarding their experiences at the school to gather evidence of any wrongdoing that might have occurred.

"We believe that Vista College may have committed widespread fraud," the group added in the letter. "We believe that they may have targeted specific types of people—low-income people and also people of color—so they could put them into lifetimes of crushing debt for their own profit. We believe that they also may have lied to students about the quality of the education, and about the likelihood that those students could get well-paid jobs in their fields with a Vista degree."

Last month, the Debt Collective also wiped out $1.7 million in debt students owed to Bennet College, a women's Historically Black College or University, through a collaboration with the school to provide relief to its students.

Advocates have been placing increasing pressure on President Joe Biden's Education Department to act on federal relief for borrowers defrauded by for-profit schools. The department to date has approved over $7 billion in borrower defense claims, and it reached a settlement with advocates on Wednesday to give about $6 billion in relief to 200,000 borrowers whose claims have been pending for years.

In the beginning of June, the department issued its largest ever group student-debt discharge for all remaining Corinthian College students who had not yet received relief, and the Debt Collective is hoping the department will take the same approach with Vista College students, so they do not need to individually file claims themselves. But in the meantime, federal borrowers can expect a decision from Biden on broad student-debt cancellation — an announcement likely to happen in July or August, closer to when the pause on student-loan payments expires after August 31.

Read the original article on Business Insider