Thursday, the US Department of Education ad his new plan to help reduce the debt of those who borrowed federal money to pay off student loans.
Under a new streamlining process, borrowers who have approved claims confirming that their college or institution has defrauded them or engaged in financial misconduct will be able to seek full relief.
Authorities estimate that this could help about 72,000 borrowers receive $ 1 billion in loan cancellations.
“Borrowers deserve a streamlined and fair path to relief when they have been harmed by the fault of their institution,” said Education Secretary Miguel Cardona. “Careful examination of these claims and associated evidence has shown that these borrowers have been wronged and we will give them a fresh start from their debt.”
The Department of Education will replace the previous formula used to calculate relief – used by former Education Secretary Betsy DeVos under the Trump administration – and ensure that borrowers with verified claims against an American school benefit from a complete cancellation of their loan.
The current education ministry said after reviewing the formula used by the DeVos administration, “the ministry determined that this did not result in an appropriate remedial decision” for defrauded borrowers.
The Department of Education will provide eligible borrowers with full relief from related federal student loans, repay amounts paid on loans, instruct credit bureaus to remove negative reports associated with the loan, and reinstate eligibility for federal aid to students.
This new approach is similar to the Defense of the borrower, a legal warning that protects student borrowers from fraudulent schools and colleges. A spokesperson for the department confirmed to The Hill that this was used frequently under the Obama administration, primarily in cases relating to complaints from Corinthian College students.