The U.S. Department of Education announced today that it will cancel $5.8 billion of student loans.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden’s Education Department announced historic student loan relief today — and the largest student loan forgiveness in U.S. history. Here are the key highlights:
- $5.8 billion of student loan forgiveness;
- 560,000 student loan borrowers will get their federal student loans canceled;
- Impacted student loan borrowers include those who attended any campus owned or operated by Corinthian Colleges Inc. from its founding in 1995 through its closure in April 2015;
- The Education Department previously concluded that Corinthian “engaged in widespread and pervasive misrepresentations related to a borrower’s employment prospects, including guarantees they would find a job.”; and
- Corinthian also “made pervasive misstatements to prospective students about the ability to transfer credits and falsified their public job placement rates.”
“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” U.S. Secretary of Education Miguel Cardona said.
Student loan borrowers won’t have to take any action to get their student loans discharged. Rather, the Education Department will contact affected student loan borrowers soon. Student loan cancelation for these student loan borrowers will follow in subsequent months.
Student loan forgiveness: more allegations
Vice President Kamala Harris, who previously served as Attorney General of California, sued Corinthian and alleged that:
- Corinthian intentionally misrepresented its job placement rates; and
- Corinthian engaged in deceptive and false advertising and recruitment.
At its peak in 2010, Corinthian enrolled more than 110,000 students at 105 campuses. Corinthian sold most of its campuses in 2014 and closed the remaining campuses in 2015. Harris’ lawsuit helped spur additional actions against Corinthian, which helped lead to multiple claims of student loan borrower defense to repayment. This resulted in student loan borrowers who attended these schools getting their student loans discharged.
“For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep,” Cardona said. “While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions – and the corporations that own them – never again get away with such abuse.”
In 2016, Harris and the state of California obtained a $1.1 billion judgment against Corinthian, in which the judge found that Corinthian “misrepresented job placement rates, its program offerings, whether students could transfer credits, among many other false or misleading actions.”
Student loan forgiveness: next steps
Today’s major announcement on student loan forgiveness is a big win for student loan borrowers. Importantly, this student loan forgiveness is separate from any potential wide-scale student loan cancellation that Biden is considering. The White House has denied a report that Biden has decided whether to cancel up to $10,000 of student loans. Advocates are hoping Biden will consider not only wide-scale student loan forgiveness, but also cancel a much higher amount of student loan debt. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) are pushing for up to $50,000 of student loan cancellation. Other legislators say that Biden should cancel all student loan debt. If Biden proceeds with wide-scale student loan cancellation, one major question is what happens to the student loan payment pause. Currently, this student loan relief will end on August 31, 2022. It’s essential that you’re prepared for the restart of student loan payments. Consider all your options to pay off student loans faster, including these popular strategies to save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)