The Biden administration has reached a deal that would provide a new $6 billion in student loan forgiveness, benefiting approximately 200,000 borrowers as part of an ongoing process class action.
The group of borrowers claim that they have been defrauded by a number of colleges that failed to provide the education they advertised. This is part of a rule known as defense of the borrower to repaymentwhich allows students misled by colleges to apply for financial aid.
Often these complaints relate to inflated placement rates or the ability to transfer credits. The decision still needs to be ratified by a judge but, given that the deal would represent complete debt forgiveness for the majority of those involved, no opposition is expected.
Who will benefit from the new student loan forgiveness?
The deal proposed by the White House would allow borrowers involved in a lawsuit against one of 50 colleges to obtain a substantial amount of debt cancellation. Most of the colleges involved in the action are for-profit institutions, and rebate recipients must have already added their names to the application.
Borrowers under this deal will also get a refund of any payments already made, in what could turn out to be a very lucrative payday. Of the group receiving forgiveness, around 74,000 were also part of a lawsuit launched under the Trump administration which was blocked.
The lawsuit was brought by the Harvard Law School’s Predatory Student Loan Project and its director Eileen Connor called the settlement a “momentous” decision for borrowers.
She said she hoped the deal would “provide answers and certainty for borrowers who have fought long and hard for a fair resolution of their borrowers’ defense claims after being deceived by their schools and ignored or even rejected by their government.
Will there be more student loan forgiveness from Biden?
This latest wave of student loan cancellations is bringing the total written off under President Biden at $25 billion, benefiting some 1.3 million borrowers. However, the United States has 43 million people with outstanding student loan debt, this is far from the end of calls for loan forgiveness.
In the election campaign Biden has indicated he would be willing to back $10,000 in student loan rebates. However, White House officials have since said an income threshold is being considered, to prevent high-income borrowers from getting the relief.
The current pandemic induced pause on student loan repayments is expected to end August 31. As that deadline approaches, it is likely that talk of student debt cancellation will become increasingly vocal in Washington DC.