Biden Administration Agrees to Cancel $6 Billion in Student Loans

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The U.S. Department of Education has agreed to forgive roughly $6 billion in student loans for about 200,000 students who say they were defrauded by mostly for-profit schools, many of which are no longer in operation.

The agreement is part of a proposed settlement of the legal case Sweet v. Cardona, which began with seven students suing then-Secretary of Education Betsy DeVos in 2019. The plaintiffs claimed that the Department of Education was ignoring or improperly rejecting their applications for relief from student debt associated with schools that defrauded borrowers. At the time, DeVos was critical of the federal government’s effort to forgive the debt, rejecting it as a “free money” giveaway.

The settlement would reverse 128,000 rejections of debt relief issued during the Trump administration – rejections that one judge involved in the case described as “disturbingly Kafkaesque.” More than 150 schools are involved (see a list here), including some that are still in operation, such as the University of Phoenix and DeVry University.

The agreement still needs to be approved by a federal judge. In a statement, Secretary of Education Miguel Cardona celebrated the tentative outcome. “We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.”

Earlier this month, the Biden administration announced that it was forgiving $5.8 billion in student debt associated with Corinthian Colleges, a for-profit educational chain that shut down in 2015 amid accusations of fraud and mismanagement.

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