Education Department Cuts Devos’ Formula that Reduced Debt Relief for Defrauded Students

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Photo of a graduation cap on a pile of $100 bills

The U.S. Department of Education announced during a Thursday press call that it is undoing a Trump-era formula that limited loan forgiveness for students who were defrauded by for-profit colleges.

Rescinding the formula could lead to $1 billion in student loan debt being eliminated for nearly 72,000 defrauded borrowers, the department said.

The formula applied to the Borrower Defense to Repayment program, which allows students to have their loans canceled if they can prove they were misled by their colleges. The Obama administration expanded the program and provided full loan forgiveness when several non-profit schools, such as Corinthian Colleges and ITT Technical Institute, were shut down for enticing students to take on costly loans.

In 2019, former Education Secretary Betsy DeVos introduced a new, controversial methodology for processing borrower defense claims that provided only partial relief for defrauded students.

Now, Education Secretary Miguel Cardona is dropping DeVos’ formula and retroactively providing full discharge for all previously approved borrower defense claims.

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said during the press call. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”