Biden forgives student loan debt for 200,000 borrowers – Forbes Advisor
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If you were defrauded by a college and have since been paying, hoping for your student loan to be forgiven, you might feel like you just won the lottery. On June 23, the Biden administration announced it would forgive student loan debt for about 200,000 former students, up to $6 billion.
These students attended one of the more than 150 schools named in class action settlement, Sweet v. Cardona. The students claimed that in return for their exorbitant payments, they received an inferior and shoddy education. In short, they felt cheated – enough to sue the Department of Education.
Some of the biggest names on the list of 150 for-profit schools include DeVry University, Grand Canyon University, and the University of Phoenix. Some of the lesser-known schools on the list include the Robert Fiance Institute of Florida and the Court Reporting Institute of St. Louis.
This all happened amid talks that the White House could forgive $10,000 in federal student debt for borrowers who earn less than $150,000 a year. So far, these are just discussions, but the White House has hinted that a decision will be made soon.
While navigating the high cost of food and gas and other inflationary expenses, about 43 million Americans are currently paying off $1.75 trillion in student debt. So for some borrowers, that $10,000 student debt decision can’t come soon enough.
Why This Student Loan Debt Is Forgiven
This $6 billion student loan forgiveness is part of a solution to a long-simmering problem – predatory, for-profit schools that leave their students worse off than if they hadn’t attended and contracted loans.
In 2010, the United States Government Accountability Office (GAO) sent undercover people to 15 for-profit colleges and found that all 15 colleges made misleading or otherwise questionable statements to applicants. Four colleges actually encouraged applicants to engage in fraudulent practices, such as lying on federal aid forms.
In 2019, 264,000 borrowers banded together and sued the Department of Education, hoping to take advantage of a federal program called “borrower defense until repayment.” While the Sweet v. Cardona guarantees that 200,000 borrowers will no longer have to repay their loans and get back the money they paid, an additional 64,000 applicants are still having their files reviewed.
The Borrower’s Defense Until Repayment program allows students to get their money back, only if there is hard evidence that they were really cheated. So if you thought you had bad teachers or just didn’t get the education you were hoping for, that probably won’t be enough to wipe out your federal student loan debt.
The settlement was just one of many student loan forgiveness cases to make headlines this year. Earlier this month, the Biden administration eliminated nearly $6 billion in loans for 580,000 borrowers who attended Corinthian Colleges, which was closed in 2015. Among other things, the educational institution aimed lucrative has been accused of deceptive marketing to students and lying to the government. on their graduation rates.
In this case, borrowers were not subject to a crippling tax bill. Often, when debts are forgiven, you still have to pay taxes on them because they are treated as “income”. But the IRS hasn’t recognized borrowers’ canceled debt as income, and it seems likely they won’t in this case either.
How to Apply for Student Loan Forgiveness if You’ve Been Scammed
If you’re not one of the 264,000 people involved in this class action lawsuit and buried in student loans, you might be wondering where you fit into all of this.
If you have been to a school and feel like you have been cheated or defrauded, you can apply for forgiveness through the Department of Borrower’s Repayment Defense Program. Education. The application process only takes about 30 minutes, according to the website, but you’ll wait longer for a response — in some cases, it can take months or even years. You can also call the Department of Education’s Borrower Advocacy Hotline at 855-279-6207, 8 a.m. to 8 p.m. ET, Monday through Friday.
Student loan debt remains a major problem for borrowers
Meanwhile, the decision to cancel $6 billion in student debt does nothing to solve the problem of student debt in general. As the US Department of Education has suspended student loan payments until August 31, 2022, anxious borrowers are anxiously awaiting what will happen when their payments resume.
“[The] This announcement is great news for thousands of borrowers who need help and is a step in the right direction, but it does not change the affordability calculations faced by students today,” says Josh Lachs, CEO of Moneythink, an educational technology nonprofit with offices. in San Francisco and Chicago.
“Students still have to make incredibly difficult decisions about how to pay for their college education; most low-income students will still need loans to get to and from school, and information about college fees and financial aid is still complex, inconsistent, and downright confusing,” adds Lachs.
How to manage student loan debt now
Prior to this latest settlement, the Biden administration had canceled $25 billion in student loans. If your debt wasn’t one of them, but you feel bogged down by what you still owe, you may have options.
“For new grads who are currently buried in student debt, each borrower’s situation is unique, but there are steps you can take to ease the burden,” Lachs says. “If you hold federal loans and are a teacher, or work in a government or non-profit job, the first step would be to investigate the loan forgiveness option. If your loans are held by individuals, consider going to a student loan assistance agency to develop a thoughtful plan for repaying your loans.
In the meantime, you can always wait and hope for relief from the Biden administration in the form of $10,000.
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