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Education Department Cancels $3.9 Billion of Student Debt for Former ITT Tech Students

By Maria Carrasco, NASFAA Staff Reporter

The Department of Education (ED) announced on Tuesday it would cancel $3.9 billion worth of federal student loans owed by former students of ITT Technical Institute (ITT), a for-profit college that shut down in September 2016.  

The announcement states that all remaining federal student loans that borrowers received to attend ITT from Jan. 1, 2005, through its closure in September 2016, will be discharged. The decision amounts to 208,000 borrowers receiving $3.9 billion in full loan discharges and includes borrowers who have not yet applied for a borrower defense to repayment discharge. 

"It is time for student borrowers to stop shouldering the burden from ITT's years of lies and false promises," Secretary of Education Miguel Cardona said in a statement. "The evidence shows that for years, ITT's leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause. The Biden-Harris Administration will continue to stand up for borrowers who've been cheated by their colleges, while working to strengthen oversight and enforcement to protect today's students from similar deception and abuse."

Additionally, ED formally notified DeVry University, a for-profit institution, that it is required to pay millions of dollars for approved borrower defense applications. During a press conference on the announcement, Richard Cordray, chief operating officer of the Office of Federal Student Aid, said the DeVry University announcement is an “unusual instance” because the institution is still open. 

“As we're able to get more current with these matters than may have been the case in the past,  we would expect to be able to have a better chance of recouping money for taxpayers, which is certainly always a goal for us,” Cordray said. 

ED also announced its approval of discharges for about 100 borrowers who enrolled in the Medical Assistant or Medical Billing & Coding Program at Kaplan Career Institute's Kenmore Square location in Massachusetts from July 1, 2011 to Feb. 16, 2012. Tuesday's announcement brought the total amount of loan relief approved by the Biden administration to nearly $32 billion for 1.6 million borrowers. 

ED states it found evidence of wrongdoing from ITT based on extensive internal records, testimony from ITT managers and recruiters, and firsthand accounts from borrowers. Cordray added during the press briefing that his office reviewed thousands of individual borrower defense claims against ITT. 

“The FSA Borrower Defense Group determined between January 2005 and September 2016 … ITT systematically lied to students and potential students about their employment prospects, and exaggerated the average earnings of graduates,” Cordray said. “Even prior to today's announcement, based on these findings, FSA has approved approximately $660 million in borrower defense discharges for more than 23,000 individual applicants who made applications to the department.” 

Earlier this year in February, ED announced it canceled $660 million in discharges for approximately 23,000 students at ITT’s nursing program. And in June last year, ED announced forgiveness for 18,000 borrowers who attended ITT, which amounted to roughly $500 million in relief.

The news comes after ED announced in April that approximately 20,000 Marinello Schools of Beauty borrowers would receive full discharges of around $238 million in student loan debt. Additionally, in June ED announced that it would cancel $5.8 billion in loans for 560,000 borrowers who attended any campus owned or operated by Corinthian Colleges, Inc.

During the Tuesday press conference, Cordray said that ED has begun sending cases to loan servicers for processing for Marinello Schools of Beauty and Corinthian Colleges. Cordray added that some of Corinthian Colleges borrowers have already had their loans wiped out. 

“None of these borrowers will ever have to pay another dime on their student loans,” Cordray said during the press conference. “Right now we're in a payment pause and we will keep these loans in forbearance whether or not the payment pause is lifted, and make sure that we apply the discharges before anybody would have to pay anything further on these loans.”

 

Publication Date: 8/17/2022


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