What the Latest Student Debt Announcement from The Department of Education Means for Defrauded Borrowers | Blog

March 29, 2021

On March 18, 2021, the Department announced full debt cancellation for borrowers with partial relief decisions on their borrower defense applications. More than 90% of borrower defense applicants are not affected by the Education Department’s partial relief announcement because their applications were denied or because they are still waiting for a decision. Here’s what that means.

 

Earlier this month, the U.S. Department of Education announced that it would rescind its unlawful and harmful partial relief policy – for the second time – promising to grant full student loan relief to a subset of defrauded student borrowers who had been covered by this policy. The Department estimates that this will impact 72,000 borrowers and cancel up to $1 billion in fraudulent student loan debt.

 

This outcome is a direct result of our clients’ willingness to go to court and stand up for themselves and others. The partial relief rule first was enjoined by a federal court in Calvillo Manriquez v. DeVos, and this second policy has been challenged in Pratt v. DeVos. We’re proud that our clients and litigation stopped these rules from being carried out and that they have now officially been scrapped.

 

It’s good news and an important first step toward fixing the broken borrower defense process and ensuring that defrauded students can get the debt relief they are legally owed.

 

But it’s important to remember that this policy change addresses one piece of a much larger borrower defense system that is not only fundamentally broken, but continues to hold hostage over 100,000 borrowers who have been waiting years for their fraudulent loans to be cancelled. The partial relief policy was layered on top of the harmful 2019 borrower defense rules, and its repeal does not affect those rules.

 

What it Means for Student Borrowers

The Education Department’s announcement that it will grant full discharge applies specifically to the subset of students who were subject to the Department’s 2019 partial relief rule. Only people whose borrower defense applications were already granted and received a partial relief decision are included in this group. It does not include those who received denials or no answer at all. This impacts some Corinthian and ITT students, but not everyone who attended those schools, and nobody who attended any other schools.

 

Full relief for borrower defense applicants will include:

  • 100 percent discharge of borrowers’ related federal student loans,
  • reimbursement of any amounts paid on the loans, where appropriate under the regulations,
  • requests to credit bureaus to remove any related negative credit reporting, and
  • reinstatement of federal student aid eligibility, if applicable.

 

These 72,000 borrowers will finally experience the relief they are legally owed, and have been unfairly denied. But the vast majority of borrowers – more than 90% of those with pending borrower defense claims – are not impacted by this announcement.

 

According to the latest data reported, the majority of borrower defense applicants have either had their applications denied or haven’t received a decision yet. That means that over 100,000 borrowers have not received loan cancellation under borrower defense and are still waiting for Secretary Cardona to cancel their loans. That includes all applicants from every single school other than Corinthian (Everest, Heald, Wyotech) and ITT Tech.

 

To find out the status of their borrower defense application, borrowers can visit StudentAid.gov/borrower-defense.

Borrowers can also call the Department of Education’s Borrower Defense Hotline at 1-855-279-6207 between 8 AM and 8 PM eastern time.

 

What’s Next for Borrower Defense

 On March 18, we also filed an updated complaint in our case Sweet v. Cardona (formerly Sweet v. DeVos), as new evidence revealed that the Department of Education not only illegally delayed processing borrower defense claims, but created a sham process designed to deny borrowers debt relief regardless of the merits of their claims. Although this process is a reflection of the previous administration’s extreme hostility toward student loan borrowers, the fact remains that these memos and policies are still in place.

 

This is also why we wrote a letter to Secretary Cardona shortly after his confirmation, urging him to do three things immediately:

  1. Cancel debts of all former Corinthian College students;
  2. Cancel debts of all former ITT Tech students;
  3. Cancel all debts of for-profit college students who have filed borrower defense claims.

 

We are acutely aware that over the last year, our clients have been disproportionately impacted by COVID-19 and the related economic downturn has only exacerbated their student loan burden and financial hardship.

 

The time to cancel these loans was yesterday. We’re committed to working alongside our clients and pushing to make sure they get the justice they deserve – today, tomorrow, and the next day.

 

If you are a borrower:

  • Click here for information for class members in Sweet v Cardona.
  • Click here for information for former Corinthian students.
  • Click here for Frequently Asked Questions about the borrower defense announcement.