InfoBytes Blog
Education Dept. to forgive $72 million of student loans after FTC action
On February 16, the FTC announced that the Department of Education (Department) will forgive $71.7 million in federal loans for approximately 1,800 former students deceived by a for-profit university. In 2016, the FTC sued university operators for allegedly advertising that 90 percent of graduates found jobs in their fields within six months of graduation, and that graduates had a 15 percent higher income on average than graduates of all other colleges or universities one year after graduation. The announcement expands on a prior FTC settlement, which required the university to pay $49.4 million in partial refunds to qualifying students and $50.6 million in debt relief. The forgiven debt included the full balance owned on all private unpaid student loans issued by the university to students as well as debts for items such as tuition, books, and lab fees. According to the Department’s announcement, these are the first approved borrower defense claims associated with a currently operating institution. The Department noted that it intends to recoup discharge costs from the university and anticipates an increase in the number of approved claims related to the university as it continues to review pending applications.
The Department stated in total it is cancelling $415 million in student loan debt under the borrower defense to repayment program, noting that several other actions will provide borrower defense discharges to nearly 14,000 borrowers attending other colleges and universities. “The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” said U.S. Secretary of Education Miguel Cardona. The Department further noted that it is working on new regulations to improve the borrower defense to repayment program, as well as other discharge programs to provide more protections for students and taxpayers. “This includes writing a new borrower defense regulation, proposing to re-establish a gainful employment regulation to hold career training programs accountable for unaffordable debt, and proposing to create financial triggers so that the Department has monetary protection against potential losses, including borrower defense liabilities,” the Department said in its announcement.