Wiped Clean: Biden Administration Cancels $6 Billion in Student Loan Debt

The Biden administration confirmed that it will wipe clean the federal student loan debts of roughly 200,000 borrowers who claimed in a class-action lawsuit that they were defrauded and misled by their schools.

the Sweet v. cardona settlement is expected to cancel a total of $6 billion of student loan debt, according to a new Politico report.

Eileen Connor, the director of Harvard Law School’s Project on Predatory Student Lending, which brought the lawsuit, called the settlement in a statement a “momentous” agreement that “will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government.”

She added that “it will not only help secure billions of dollars in debt cancellation for defrauded students, but charts a borrower defense process that is fair, just, and efficient for future borrowers.”

The Project on Predatory Student Lending has put together a list of the dozens of schools that are involved in the settlement and that the US Department of Education has determined engaged in misconduct.

“Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” Secretary of Education Miguel Cardona said in a statement.

“We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties,” he continued. .

The settlement follows Vice President Kamala Harris’ announcement earlier this month that the Education Department would forgive all of the remaining $5.8 billion of student loan debt for 560,000 borrowers who attended schools operated by Corinthian Colleges.

Founded in 1995, Corinthian Colleges was formerly one of the largest for-profit education companies, and Biden’s move brings closure to one of the most notorious cases of fraud in higher education in the United States. The company, which had enrolled more than 100,000 students across 100 campuses, filed for Chapter 11 bankruptcy in 2015.

“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.

The Biden administration is also mulling whether to move ahead with broad-based student loan forgiveness. For months, lawmakers like Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA), and Sen. Raphael Warnock (D-GA) have aggressively pressed Biden to sign off on canceling $50,000 of student loan debt per borrower. The president, though, has indicated that he likely won’t go higher than his campaign promise of $10,000 per borrower.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.

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