Biden admin quietly uses existing student loan debt relief program to cancel billions in unpaid obligations

 March 7, 2023

President Joe Biden's administration has quietly canceled billions of dollars in federal student loan debt for hundreds of thousands of borrowers through an already existing debt relief program, according to the Washington Examiner.

That news comes as Biden attempted to unilaterally implement a new plan to wipe out upwards of $400 billion in outstanding federal student loan debt for tens of millions of borrowers, only for that program to be blocked by the courts, and it looks like it will soon be deemed unconstitutional by the Supreme Court later this year.

Per the Examiner, the existing program allows borrowers who were defrauded or misled by certain colleges and universities to assert a defense against repayment of their debt if the claimed fraud and misrepresentation or other violations of the law can be proven.

Defense against debt repayment for shuttered, legally troubled schools

The Los Angeles Times reported that this debt relief program for federal student loan borrowers was informally in existence for decades until it was formalized and ramped up near the tail-end of the Obama administration, only to then be deprioritized and left largely stagnant under the Trump administration.

It has been quietly revived and reinvigorated under the Biden administration, however, and the Education Department is reportedly moving aggressively to approve as many applications and relieve as much student loan debt as it can.

The Times noted that, since 2015, more than 770,000 borrowers have applied to the relatively unknown program, and though more than half a million applications reportedly remain pending, the administration is working hard to push billions of dollars in taxpayer-funded relief out the door.

Relatedly, the program has already relieved upwards of $18 billion in debt for borrowers who applied for defense against repayment for schools that were closed before the borrowers completed their degrees, including approximately $5.8 billion for more than half a million applicants from the shuttered Corinthian College and around $3.9 billion for roughly 200,000 borrowers who attended an ITT Technical Institute.

Multi-billion dollar settlement reached in class-action lawsuit

The Times also reported that, under the Biden administration and Education Sec. Miguel Cardona, the federal government reached a settlement in November on a class-action lawsuit against his Trump administration predecessor, former Education Sec. Betsy DeVos, over the alleged delays in processing the borrower defense applications.

"Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process," Cardona said of the settlement in a statement. "We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief."

The proposed settlement for that suit, known as Sweet v. Cardona, reportedly involves around 200,000 borrowers who attended one of a list of approximately 150 schools that have either been shut down or faced serious legal troubles, and those borrowers are set to receive a combined $6 billion-plus in debt relief.

The Times further noted that an additional 64,000-plus borrowers who have applied for borrower defense relief will likely receive a response and have their debts forgiven within the coming weeks and months.

Eileen Connor, the director and president of the Project on Predatory Student Lending told the Times, "I think that the Biden administration recognizes that there is this legal obligation [to borrower defense applicants], in that there has to be a process, it has to be fair, it has to be timely," and added, "People can’t be waiting for seven, eight years with their entire life on hold."

By any means necessary

Meanwhile, the Examiner noted that President Biden's much larger proposed student loan debt relief program, which would relieve anywhere from $10,000 to $20,000 in federally-backed student loan debt for tens of millions of borrowers, at an estimated cost to taxpayers of more than $400 billion, is currently on hold and likely to be struck down as unlawful by the Supreme Court in the coming months.

Thus, the outlet explained, the administration will continue to try to accelerate and expand already existing programs, such as the one for borrower defense, in order to fulfill his campaign promise to wipe away as much student loan debt as possible at the expense of U.S. taxpayers.

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