Biden's Education Dept. just made 2,100 students eligible for debt relief

Richard Cordray
FSA Director Rich Cordray. REUTERS/Larry Downing
  • The Federal Student Aid office just found violations that cost taxpayers $6 million from 2015 to 2018.

  • The defunct RWM Fiber Optics incurred 16 violations, while 2,100 former students of Harrison College are eligible for debt relief.

  • The Education Dept. is in the process of reforming the student-loan system amidst calls to cancel all debt.

  • See more stories on Insider's business page.

In the Education Department's latest move to protect student-loan borrowers, it found on Tuesday that violations of student-aid requirements and school closures from 2015 to 2018 cost taxpayers over $6 million in liabilities.

The Federal Student Aid (FSA) office announced in a press release that RWM Fiber Optics - a for-profit, now defunct school - improperly handled student loans and related aid, leaving borrowers with unfair debt loads. It also noted that the 2,100 students who attended Harrison College's 11 campuses are eligible for loan forgiveness after its 2018 closure. This follows the Education Department's announcement last week that it will form a negotiated rulemaking committee to address a range of issues affecting student loan borrowers, like debt forgiveness from fraudulent schools.

"All institutions are expected to serve the best interests of their students, not serve themselves," FSA Chief Operating Officer Richard Cordray said in a statement. "Schools that engage in bad behavior or that suddenly close their doors, leaving students out in the cold, will be held accountable, and we expect other schools to pay attention to the actions we are taking today."

Specifically, FSA found that before RWM's closure in 2018, the school falsified information to make students eligible for aid they did not qualify for, fictionalized diplomas that students did not earn, and submitted student aid information without the student's knowledge without checking if the information was accurate.

RWM also used the Federal Work Study program to pay students to clean bathrooms and collect garbage, which didn't help further students' careers as the program required. FSA concluded that the school conducted 16 "egregious" violations worth over $2.4 million.

FSA also found that students who attended Harrison College, which closed in 2018, are eligible to get their students loans discharged given that they were unable to complete their programs due to the school's closure. Harrison owes almost $4 million to taxpayers who paid to forgive loans for those borrowers.

Insider previously reported that Cordray's role in student aid could signify a possible remedy to the student debt crisis given his alliance with Massachusetts Sen. Elizabeth Warren, a prominent advocate for student debt cancellation.

Last month, he rescinded a Trump-era policy that restricted states' abilities to oversee student-loan servicers, and separately, the Education Department has begun to forgive debt for students who were defrauded by for-profit schools.

But while the department is in the process of implementing changes to the student-loan system as a whole, through reforming loan forgiveness programs and working to give eligible borrowers student debt relief, the process could take years, and advocates want President Joe Biden to act quickly on widescale student debt forgiveness for every borrower.

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