The Department of Education on Wednesday announced that it approved the cancellation of about $500 million of federal student loans held by 18,000 former ITT Technical Institute students.

What You Need To Know

  • The Education Department announced that it approved the cancellation of about $500 million of federal student loans held by 18,000 former ITT Technical Institute students

  • The move marks a step forward in the Biden administration’s effort to clear a backlog of claims in the borrower defense program, which provides loan forgiveness to students who were defrauded by their colleges

  • Claims piled up during the Trump administration, which stalled the program; there are more than 100,000 pending claims

  • Borrower advocates applauded the new approvals but called for swift relief for the thousands of other students whose claims are still pending

“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” Education Secretary Dr. Miguel Cardona said in a statement. “Today’s action is part of the Biden-Harris Administration’s continued commitment to stand up for borrowers when their institutions take advantage of them.”

The move marks a step forward in the Biden administration’s effort to clear a backlog of claims in the borrower defense program, which provides loan forgiveness to students who were defrauded by their colleges. Claims piled up during the Trump administration, which stalled the program and only started processing claims after a federal court demanded it. There are now more than 100,000 pending claims.

“Many of these borrowers have waited a long time for relief, and we need to work swiftly to render decisions for those whose claims are still pending,” Dr. Cardona continued. “This work also emphasizes the need for ongoing accountability so that institutions will never be able to commit this kind of widespread deception again.”

The debts are being forgiven under a provision known as “borrower defense to repayment,” claims which allow students to petition for their debts to be erased “if your school misled you or engaged in other misconduct in violation of certain state laws,” according to the Education Department’s Federal Student Aid office.

ITT Technical Institutes shut down in 2016 after the DOE barred it from enrolling students who receive federal aid. 

Prior to its closure, ITT Tech was being investigated by two federal agencies and more than a dozen state attorneys general for deceptive marketing, alleged fraud or steering students into predatory loans, according to the Washington Post.  In 2020, the Consumer Financial Protection Bureau and 48 state attorneys general secured $330 million in private student loan-relief for 35,000 former ITT Tech students.

It follows another round of loan discharges in March, when the Education Department cleared $1 billion in federal student debt for 72,000 borrowers. Those claims all came from former students of for-profit colleges.

Borrower advocates applauded the new approvals but called for swift relief for the thousands of other students whose claims are still pending, including many who attended ITT Tech.

“It appears the Biden administration genuinely wants to help people who are owed discharges,” said Alex Elson, vice president of Student Defense, a Washington legal group. “But that makes it all the more confounding that they are so hesitant to use their authority to immediately and automatically help the countless additional borrowers who are still waiting.”

Borrower defense is among several education programs targeted for an overhaul by the Biden administration as it works to reverse Trump-era policies. Cardona is hosting a series of hearings this month as his agency considers changes to that policy and others.

The program was rarely used until 2015, when the Education Department received thousands of claims from former students of Corinthian Colleges. The chain of for-profit colleges had recently shut down following findings that it lied to students about job placement rates.

Following the collapse of Corinthian and other beleaguered for-profit colleges, the Obama administration moved to make it easier for students to get loans erased. But the overhaul was reversed by the Trump administration, which later wrote its own rules making it tougher to get relief. In changing the rules, then-Education Secretary Betsy DeVos said it had become too easy to get loans forgiven.

Cardona began chipping away at DeVos’ rules in March when he rescinded a formula that allowed the Education Department to give only partial loan discharges to students whose claims were approved. All borrowers granted relief will now get their loans cleared in full.

Many of the 18,000 claims from ITT Tech were approved after the Education Department found that the company lied about graduates’ job prospects. The agency said ITT made “repeated and significant misrepresentations” about its ability to help students get jobs. In reality, many students said it was harder to find employment when they listed ITT on their resumes, the department said.

Other claims were approved after the department found that ITT misled students about their ability to transfer course credits to other colleges. Credits were rarely accepted elsewhere, the department said, leaving students with “little to no progress” in their academic careers.

Borrowers will be notified about their claim approvals in the coming weeks, the agency said.

The Associated Press contributed to this report.