President Biden is canceling $500 million in federal student loans for defrauded borrowers who attended ITT Technical Institute.
On June 16, 2021, President Biden's U.S. Department of Education announced that $500 million of student loan debt will be canceled under the borrower defense to repayment rule for 18,000 defrauded borrowers who attended ITT Technical Institute (ITT). Previously, President Biden discharged over a billion dollars in federal student loans and provided debt relief to borrowers with defaulted Federal Family Education Loans (FFELs).
All of this relief is in addition to pausing student loan payments, reducing interest rates to 0%, and halting all collections of student loans in default from March 2020 to September 30, 2021
Loan Forgiveness Under the "Borrower Defense to Repayment" Rule
In 2016, the Obama administration set up a new loan forgiveness program to help defrauded student borrowers cancel their federal student loans. Under a federal law known as "borrower defense to repayment," if your school, say ITT or a Corinthian College, misled you, deceived you, or engaged in other illegal misconduct that convinced you to enroll or remain enrolled, you can get a full discharge of the federal Direct Loans you took out to attend the school. (34 C.F.R. § 685.206).
Loan Relief for 18,000 Borrowers Who Attended ITT Technical Institute
On June 16, 2021, the Education Department announced it would approve 18,000 borrower defense to repayment claims for students who attended ITT. These borrowers will get 100% loan discharges, amounting to around $500 million in cumulative loan relief.
The approvals cover two categories of claims that borrowers who attended ITT Technical Institute submitted:
- Likely employment prospects. The Education Department found that between 2005 and when the school closed in 2016, ITT made repeated and significant misrepresentations to students about how much they could expect to earn and the jobs they could get following graduation. Borrowers found that including ITT on their resumes actually made it more difficult to find employment and didn't improve their job prospects. The Department is expanding findings that it had previously made only for students who attended ITT in California to cover other borrowers who went to ITT, no matter where they attended.
- Ability to transfer credits. The Education Department also found that from January 2007 through October 2014, ITT misled students about being able to transfer their ITT credits to other schools. The Department learned that credits hardly ever transferred, and borrowers made little to no progress with their education but racked up student loan debt during their time attending ITT.
The Department said it will notify borrowers about loan approvals in the upcoming weeks and then discharge those borrowers' loan balances. For more information about borrower defense to repayment claims, go to StudentAid.gov/borrower-defense.
Earlier Student Loan Relief Under the Biden Administration
Since taking over the presidency, Biden has canceled around $3 billion of federal student loans. In addition to the loan forgiveness discussed earlier in this article:
- Biden canceled $1 billion of student loans for 72,000 student loan borrowers who previously had part of their federal student loans canceled under a borrower defense to repayment claim.
- Biden canceled another $1.3 billion of student loans for 41,000 borrowers whose federal student loans were forgiven due to total and permanent disability and then reinstated.
- Biden granted student loan relief for 1 million student loan borrowers who defaulted on FFELs. These borrowers get a 0% interest rate, and the Department paused collection actions on these loans during the coronavirus (COVID-19) emergency.
- The American Rescue Plan Act exempts student debt forgiveness from federal taxation until January 1, 2026, and covers Direct Loans, FFELs, and private student loans.
Effective date: June 16, 2021