The Department of Education said it will cancel $150 million of student loan debt, impacting about 15,000 people whose schools closed.
The Obama-era borrower defense relief program – which essentially ground to a halt under Education Secretary Betsy Devos – provided a path for people to seek forgiveness for federal student loans if a shuttered school violated specific laws or misled students.
DeVos was highly critical of the program, reportedly calling it a “free money” giveaway, and sought to change and delay the program. However, she was sued, and a federal judge ruled in September the program needed to “go into effect.”
Those eligible for loan forgiveness must have been enrolled at the school when it closed and not enrolled at another Title-IV school within three years of the previous school’s closing, according to the Education Department.
PLUS loans – which parents took out on behalf of children – could also be eligible for discharge.
So far, about 15,000 people have been flagged by the Education Department as eligible. About $80 million of the $150 million debt is attributed to the now-defunct Corinthian schools.
Borrowers will begin to be notified of student loan discharges by email on Friday, the department said.
“This is a good first step, but it’s not good enough,” said Sen. Patty Murray, the top Democrat on the Education Committee. She called on DeVos to “abandon her attempts to rewrite the borrower defense rule to let for-profit colleges off the hook and instead fully implement the current rule and provide relief to more than 100,000 borrowers who were cheated out of their education and savings.”
Republican Sen. Lamar Alexander, the Education Committee chair, previously argued the “Obama administration went too far in rewriting this provision by setting overly broad and vague standards and as a result, put taxpayers on the hook for too many loans.”