Tens of thousands of borrowers who attended for-profit schools like Corinthian Colleges and ITT Technical Institute that defrauded students will have their student loan debts eliminated after the Education Department rescinded some changes made during the Trump administration that gutted a relief program.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Miguel Cardona, the education secretary. “We will grant them a fresh start from their debt.”
The change will eliminate around $1 billion in student loan debt owed by around 72,000 borrowers, the department said. Most of them attended ITT and Corinthian, institutions that abruptly shut down years ago.
The relief program, known as borrower defense, allows those who can demonstrate that they were substantially misled by their school to have their federal student loans forgiven. Once little-used, the system was flooded with claims during the Obama administration after a series of large for-profit chains collapsed following a government crackdown on schools that saddled their students with high debts for a low-quality education.
imposed a complicated new methodology that led to only partial relief for many successful applicants. Some whose claims were approved were told they would get $0 in relief.
Mr. Cardona said the department will abandon Ms. DeVos’s methodology and retroactively give those with approved claims a full discharge.
“I’m in a state of shock right now,” said Albert Paul Cruz, who earned an associate degree in computer networking systems in 2010 but never worked in that field. Last year, he received a letter from the Education Department telling him that his borrower defense claim had been approved but that none of his debts would be eliminated.
Mr. Cruz has around $60,000 in student loan debt; his late and missed payments on it have harmed his credit score and made it challenging to obtain a car loan. The debt was “nerve wracking” and kept him up at night — and the prospect of finally being free from it was amazing, he said.