Freshly certified by Congress, U.S. Secretary of Education Miguel Cardona recently said the department has rescinded Trump-era student loan policies that will help completely eliminate federal student loan debt for borrowers who say they did not get the college education they were promised. The change will eventually help about 72,000 borrowers receive $1 billion in loan cancellations.
“Borrowers who have been harmed by school misconduct deserve relief from a streamlined and fair pathway,” Cardona said in a March 18 press release. “A careful review of these claims and related evidence shows that these borrowers have been harmed and that we will provide them with a new starting point for their debt.”
According to the release, the decision applies to students whose large loan applications have been approved, but who have received only partial relief.
To address the growing number of loan forgiveness requests from students, the Department of Education reversed former Education Secretary Betsy DeVos’ 2019 rewrite of the Obama-era loan forgiveness standards. The new standards accept requests from students who have been defrauded by for-profit schools, such as the now-defunct Corinthian College and other educational chains.
Originally in 2016, Obama adopted the Borrower’s Defense Act, a broader definition of “fraud” in college education that allows students to apply for loan elimination if they believe the school they went to failed to deliver the education it promised.
DeVos said that was too generous a use of taxpayer money, so she reworked the borrower defense rules in 2019. She also instructed the Education Department to calculate how much students who claim they were defrauded benefited from their education and how much debt, if any, they could repay. The calculation is based on a complex formula. The formula compares a student’s median salary to the median salary of students who have attended similar programs at other schools. Students are only eligible for relief if they fall short of their income.
Under DeVos’ new method, most borrowers who say they were cheated out of school would only be eligible for partial relief.
According to DeVos, this overhauled system “treats students fairly and ensures that taxpayers who do not go to college will faithfully repay their student loans and not pick up the tab for student loans for people who were not harmed (and did not repay). The Department of Education at the Time estimated that it could save taxpayers $1.1 billion over 10 years.
Although House Democrats voted down this change from DeVos in March 2020, the veto was in turn overruled by then-President Trump’s. Trump argued that it was a “misguided resolution” that would undermine the ability of American students to make responsible choices about their education. Since then, only six Republicans have joined the Democrats, so the House was unable to get the two-thirds majority needed to override the president’s veto, thus keeping DeVos’ rule in place.
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