Biden administration cancels federal student debt from lenders scammed by their schools

The Biden administration is canceling the federal student debt of lenders who say their schools are cheating them, and is seeking a class action lawsuit originally filed against the Trump administration.

“We are pleased to have worked with plaintiffs to reach an agreement that will provide billions of dollars in automatic relief to approximately 200,000 lenders and that we believe the claims will be resolved in a manner that is honest and fair. for all parties, “Education Secretary Miguel Cardona said in a statement Thursday.

The prosecutors in the case, Sweet v. DeVos (now Sweet v. Cardona), had filed applications for “lender defense” to cancel her federal debt for student loans due to abuse by her schools. They sued the Department of Education four years ago, in 2018, because it no longer made decisions on lenders’ defense applications. The lawsuit challenged the Department of Education’s handling of these requests, citing “delays in issuing final decisions” under former Education Secretary Betsy DeVos, and the “denial of certain applications starting in December 2019.”

According to the legal organization the Project on Predatory Student Lending, under the settlement, the Department of Education will “withdraw all denial reports it has issued between December 2019 and October 2020.”

The settlement states that the administration will repay the student loan debts of these lenders and repay all relevant payments to the Department of Education to repay these debts – including debts that have been repaid in full.

Earlier this month, the Biden administration announced students attending the now-defunct Corinthian Colleges chain would automatically have them federal student loans canceledin an attempt to close one of the most notorious cases of fraud in American higher education.

Under the new action, anyone who attended the now-defunct chain from its inception in 1995 until its collapse in 2015, will have its federal student debt cleared. It will wipe out $ 5.8 billion in debt for more than 560,000 lenders, the largest single loan in the Department of Education’s history, according to the agency.

As of December, the Department of Education reported that it had more than 109,000 applications pending from students alleging fraud by their colleges, according to the Associated Press.

Sarah Ewall-Wice and the Associated Press contributed to this report.

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