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U.S. Education Secretary Betsy DeVos

Education Department forgives $150 million in student debt after court order

A judge ruled earlier this year that the department must follow rules regarding loans involving colleges that subsequently shut down.

The U.S. Education Department has forgiven $150 million in federal loans to students who had attended schools that shut down.

The Washington Post reports that the loan forgiveness comes after a court order forcing the Trump administration to abide by an Obama-era policy that Education Secretary Betsy DeVos had sought to dismantle.

The Education Department has identified about 15,000 people who are eligible for automatic debt cancellation after borrowing money to enroll or help their children attend colleges that shut down on or after Nov. 1, 2013. Eligible borrowers are not required to take any action; the Education Department will begin notifying them by email. 

According to the Education Department, nearly half of the people eligible for loan forgiveness received funds to attend defnct for-profit chain Corinthian Colleges.

The 2015 collapse of Corinthian, a chain felled by charges of fraud and predatory lending, prompted the Education Department to update rules governing how students defrauded by colleges can erase their debt. The update included a provision to grant automatic debt cancellation to borrowers whose schools closed because so few people took advantage of the benefit.

DeVos derided the debt cancellation as a handout to students at taxpayers’ expense. She shelved the changes, which led to lawsuits from former students and state attorneys general.

In September, a federal judge denounced the move as “arbitrary and capricious” and said the rules should take effect. 

Now, DeVos must carry out the long-delayed regulations despite her objections and a failed attempt to rewrite the rules.

The Obama administration rules tried to shift more of the cost of discharging loans onto schools, much to the chagrin of for-profit colleges that said they were being unfairly targeted.

While the regulation languished, DeVos published a proposed stringent replacement this summer that placed the onus on students to prove schools knowingly deceived them. But the Education Department missed a key deadline last month for the latest rules to take effect next summer.

TAGS: Funding
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