Student-loan borrowers defrauded by Corinthian were promised $5.8 billion in relief 'immediately.' 6 months later Biden's Education Department says it'll take 'some time.'

College graduates
College graduates.Robyn Beck/AFP via Getty Images
  • In June, the Education Department approved a $5.8 billion loan discharge for former Corinthian students.

  • Education Secretary Miguel Cardona said impacted borrowers would see relief "immediately."

  • Six months later, borrowers are still waiting, and the department said relief will now take "some time."

Lawsuits blocking President Joe Biden's broad student-loan forgiveness are not the only reason some borrowers are in limbo.

Kevin was a student of now-defunct for-profit chain Corinthian Colleges from 2004 to 2006, who requested his last name be withheld for privacy.

He was one of about 560,000 borrowers who had reason to rejoice on June 1 when Biden's Education Department announced $5.8 billion in debt relief due to alleged fraudulent behavior by Corinthian that loaded students up with debt. Education Secretary Miguel Cardona said at the time that the impacted Corinthian borrowers will see their loans "immediately forgiven."

Since then, Kevin told Insider he has called the Education Department over 50 times, along with contacting his student-loan servicer and state ombudsman. He said no one has given him a definitive answer on when the relief is coming.

Plus, he said, the department's commitment to deliver on its plan to forgive up to $20,000 in student debt for federal borrowers and fight the conservative lawsuits that are seeking to block it adds insult to injury because the same fight isn't being directed toward those who attended Corinthian, which isn't being challenged in court.

"In my opinion, it seems like the administration, you, and the Dept of Ed have moved on with the 'Biden-Harris Administration Student Debt Relief Program' and have left the Corinthian students behind," Kevin wrote in a letter to Education Secretary Miguel Cardona, reviewed by Insider. "Every time I see a new article, or the administration talk about [broad student debt relief], it makes it even more frustrating that this is not done."

The department did deliver an update to Corinthian borrowers on November 17. The email Kevin showed to Insider told recipients that they were eligible for "full loan discharge" and they "do not have to make any more payments on the loan(s)."

"It will take the Department some time to process your discharge," the letter continued. "Until the Department completes its work, your eligible loan(s) from Corinthian Colleges Inc. will remain paused in forbearance/stopped collections, and we will not ask you to resume making payments. If your loan(s) are in default, we will not attempt to collect on the loan(s) being discharged."

That didn't give Kevin "any confidence that it will be done anytime soon."

"In my world, immediately means immediately," Kevin said on November 18 of the June announcement. "It's been 168 days until they sent that email, and then that email says it will take some time. So if we take the definition of 'immediately' to 'some time,' and if 'immediately' was 168 days, what is 'some time?'"

"There is no timeframe" for relief

The Corinthian discharge was a major announcement for borrowers who have been waiting for relief since the schools shut down in 2015. It also marked the largest group approval of borrower defense claims to repayment to date, which are forms borrowers submit if they believe they were defrauded by the college they attended.

After failing to receive a response from the Biden administration, Kevin reached out to Navient, the company that services his $48,000 loan balance. A customer service representative told Kevin, in a screenshot of the live chat viewed by Insider, that "there is no timeframe for Borrower Defense. This is still being worked on. I do apologize about the wait time."

Kevin said he is concerned with this response because the debt will remain on his credit report until the discharge is complete. He said the delay is inhibiting him from using the $48,000 in relief he's waiting for to enroll in another school and complete his degree.

The lack of clarity surrounding student-debt relief is not unique to Corinthian borrowers. Under former President Donald Trump's Education Department, borrower defense claims ran up significant backlogs, leaving thousands of borrowers who were defrauded by a range of for-profit schools wondering when they will receive relief.

This prompted Biden's Education Department to reform the process. Trump's Education Secretary Betsy DeVos used a methodology for borrower defense claims that compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive.

But compared to a 99.2% approval rate for defrauded claims filed under President Barack Obama, DeVos had a 99.4% denial rate using her method, prompting Cardona to reverse the process and begin sifting through DeVos' backlog. Cardona even reached a settlement in a lawsuit filed during DeVos' term by student-loan borrowers' whose borrower defense claims were stalled, and last week, a judge signed off on the settlement, granting 200,000 borrowers around $6 billion in relief.

Still, aside from the June announcement of relief, none of the Education Department's recent actions are giving Corinthian borrowers any certainty. To be sure, some of the impacted borrowers have received relief, as they noted in a Facebook group for borrowers who attended the for-profit chain, but others like Kevin are simply asking for a clear answer on when they will finally get the debt cancellation they have been awaiting for years.

"I contacted the ombudsman's office, the Florida Department of Education, the Inspector General's office, the Department of Education, the General Counsel, my congressman, and my loan servicer," Kevin said. "It's just on and on with the excuses."

Read the original article on Business Insider