Student Loan Forgiveness: How will this automatic forgiveness work?


On June 1, the U.S. Department of Education (Department) released an official statement to announce that over half a million borrowers will receive 5.8 billion dollars in full loan discharges.

Considered as the largest single loan cancellation scheme in the Department’s history, this initiative aims to discharge all federal student loans borrowed to attend any campus owned or operated by Corinthian Colleges Inc., which closed in April 2015.

The Corinthian Colleges case

The student loan cancellation program called Borrower Defense to Repayment allows students who have been defrauded or misled by their school via misrepresentations about admissions, credit transferability, or career prospects, to request loan forgiveness.

Corinthian collapsed back in 2015 following several investigations into its activities, with lawsuits filed against the schools suggesting that they intentionally misrepresented job placement rates and engaged in false advertising.

“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” said U.S. Secretary of Education Miguel Cardona.

“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.

“While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions – and the corporations that own them – never again get away with such abuse.”

Who can apply for student loan cancellation?

The government’s announcement was directed to borrowers who attended Corinthian schools, but all students who feel that they were misled by their schools could be eligible for loan cancellation.

“Under the Borrower Defense to Repayment [program], certain conduct by a school you attended might make you eligible to receive a discharge of some or all of your federal student loans,” reads the Department of Education’s website.

“The most common types of conduct that might make a borrower eligible for loan relief through Borrower Defense to Repayment discharge are misrepresentations of the truth made by the school or its representatives during their efforts to recruit you to enrol at the school or to continue your enrolment at the school.

“These misrepresentations typically take the form of untruthful representations of the school’s selectivity in admitting students, its rankings as compared to other schools, the job placement and earnings outcomes of its prior graduates, or the likelihood that its credits will be accepted by another school or that it will accept credits from other schools.”

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