Biden's Education Department just wiped out $3.9 billion in student debt for remaining borrowers defrauded by ITT Tech following 'years of lies and false promises'

ITT Technical Institutes Shuts Down After 50 Years in Operation
The move forgives debt for all ITT students who attended between 2005 and its closure in 2016.Jahi Chikwendiu/The Washington Post via Getty Images
  • The Education Department announced $3.9 billion in student-debt relief for all remaining ITT Tech students.

  • ITT, a for-profit college, shut down in 2016 following investigations into the school's fraudulent behavior.

  • The department also announced relief for nearly 100 borrowers who attended Kaplan Career Institute.

President Joe Biden's Education Department just delivered relief to all remaining students defrauded by a major for-profit institution.

On Tuesday, the department announced it has approved $3.9 billion in debt relief for all remaining federal borrowers who attended now-defunct ITT Technical Institute from January 1, 2005 through its closure in 2016. According to the press release, this will impact 208,000 borrowers, including those who did not submit a borrower defense claim themselves — a type of claim a borrower can file if they believe they were defrauded by a for-profit school. Borrowers impacted by this relief will not have to take any additional action.

"It is time for student borrowers to stop shouldering the burden from ITT's years of lies and false promises," Education Secretary Miguel Cardona said in a statement. "The evidence shows that for years, ITT's leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause."

Along with the news for former ITT Tech students, the department also announced that it has notified DeVry University — a school previously found of fraudulent behavior — that it's required to pay millions of dollars for approved borrower defense applications. A DeVry spokesperson told Insider that it has received the department's notice, and that the school "remains deeply committed to student success and preparing students to thrive in careers shaped by continuous technological change."

"We continue to believe the Department mischaracterizes DeVry's calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached," the spokesperson said.

Additionally, the department approved claims for nearly 100 borrowers who were enrolled in the Medical Assistant or Medical Billing and Coding Program at Kaplan Career Institute. Massachusetts Attorney General Maura Healey found Kaplan had misrepresented job prospects to borrowers, warranting the discharge of their debt.

Senior Counsel Libby Webster of Student Defense — a group that works to protect borrowers' rights — said in a statement that the ITT relief is "a life-changing announcement for thousands of people who only wanted to improve their lives and trusted the wrong people to help them do it."

"We commend the Biden Administration for doing the right thing, and we hope this is a sign that it plans to approve additional borrower defense claims in several other pending applications where state attorneys general have demonstrated that student borrowers are entitled to relief," Webster said.

Leading up to this announcement, the department had already approved $1.9 billion in debt relief for ITT students who had filed individual claims, prompted by a number of investigations into the for-profit chain's behavior. In 2014, the Consumer Financial Protection Bureau (CFPB) sued ITT accusing the school of pressuring students into taking on private loans they would likely default on, and a year later, the Securities and Exchange Commission took the chain to court for deceiving investors about high rates of defaults on the loans.

At the beginning of June, the department took the same approach with all students defrauded by Corinthian Colleges, another now-defunct for-profit. It enacted its largest group discharge so far, totaling $5.8 billion in relief for all remaining 560,000 former Corinthian students. Federal Student Aid Director Richard Cordray said during a Tuesday press call that loan companies have begun processing that relief, and some borrowers have already had their debt wiped out. The department's targeted loan forgiveness actions, including those for public servants and borrowers with disabilities, now total $32 billion in relief.

CFPB Director Rohit Chopra also noted during the Tuesday press call that while the ITT relief only concerned federal loans, his agency "will continue our work with the Department of Education and other regulators to open up the books on in-house institutional lending programs," which are private loans.

While Tuesday's announcement is welcome news for some borrowers who have been waiting years for the relief they deserve, it still comes as millions of other federal borrowers are awaiting news of another possible extension of the payment pause, and broad student-debt cancellation. With payments set to resume after August 31, Biden has confirmed he will make a decision on debt relief before then, leaving many waiting for that decision that could happen any day now.

Read the original article on Business Insider