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Financial Services Law Insights and Observations

Department of Education forgives roughly $150 million in student loans eligible for automatic closed school discharge

Lending Department of Education Student Lending Debt Relief

Lending

On December 13, the Department of Education announced it will automatically discharge approximately $150 million in student loans for roughly 15,000 eligible borrowers as part of implementing the Department’s Final Regulations (81 FR 75926) (also known as the “Borrower Defense Regulations” or “regulations”), which took effect in October following a decision by the U.S. District Court for the District of Columbia that the Department’s move to delay the regulations—finalized in 2016 and originally set to take effect July 1, 2017—was procedurally invalid (see InfoBytes coverage on the ruling here.) The Borrower Defense Regulations are designed to protect student borrowers against misleading and predatory practices by postsecondary institutions and clarify a process for loan forgiveness in cases of institutional misconduct. Of the $150 million, approximately $80 million of the amount is attributable to loans taken out by students who attended now bankrupt, for-profit Corinthian schools. (See InfoBytes coverage on matters related to Corinthian schools here.) The announcement also provides information for loan holders, guaranty agencies in the Federal Family Education Loan program, and schools concerning new closed school discharge requirements.

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