2,300 student-loan borrowers are getting $72 million in debt wiped out after being 'cheated' by their school, Biden's Education Department says

  • The Education Department announced $72 million in student-debt relief for 2,300 borrowers.

  • The borrowers attended Ashford University, which a judge said engaged in fraudulent behavior.

  • The loans are set to be discharged automatically, and borrowers shouldn't need to take extra steps.

Another batch of student-loan forgiveness just came for thousands of borrowers in California.

On Wednesday, President Joe Biden's Education Department, along with Attorney General Rob Bonta of California, announced it was canceling $72 million in student debt for 2,300 borrowers who it said were "cheated" by Ashford University, an online for-profit school based in San Diego. This relief is a result of approvals for borrower defense claims, which are forms borrowers can submit if they believe they were defrauded by the school they attended, and if approved, their loans for that school would be forgiven.

According to the press release, this announcement is a result of an Education Department review of a 2017 lawsuit the California Department of Justice brought against Ashford and its parent company, Zovio, during which California argued the school misled students by lying about tuition costs and employment potential, along with engaging in aggressive recruiting tactics. In 2022, a judge ruled that Ashford made 1.2 million misrepresentations to students and faced a civil penalty of $22.3 million. Ashford and Zovio are appealing the decision.

"What Ashford University did to its students was unconscionable and illegal," Bonta said in a statement. "That's why the California Department of Justice took Ashford and its parent company to court. Ultimately, we prevailed, securing more than $22 million in penalties. I want to thank the Biden-Harris Administration for changing the lives of thousands of former Ashford students today. They have lived a nightmare for too long."

Student-loan borrowers impacted by this discharge are not expected to have to make any payments on those loans. The department said it would notify qualifying borrowers that their loans would be forgiven in September, and they would see any remaining balances "zeroed out and credit trade lines deleted," the press release says. Any additional payments borrowers make on that balance are set to be refunded, and Bonta told reporters on a Wednesday press call that Ashford borrowers who did not apply for relief could submit a claim to studentaid.gov/borrower-defense.

The court's decision stated that Ashford's "admissions counselors would cross a 'gray line' ethically or 'do things they wouldn't normally do' to boost numbers to keep their jobs." The department's review found that only 25% of students graduated from Ashford within eight years of enrolling, and borrowers wrote in their applications for relief that they were unable to obtain employment and experienced financial burdens.

Since Biden took office, his Education Department has taken several steps to provide debt relief to targeted groups. Most recently with regards to borrower defense actions, the department announced that 7,400 students who were enrolled at Colorado-based locations of CollegeAmerica would receive $130 million in debt relief after accusations the company engaged in "widespread misrepresentations about the salaries and employment rates of its graduates."

The department also eased the process for students to submit borrower defense claims earlier this year, including creating a more streamlined application process and expanding the types of school misconduct that would qualify a borrower for a loan discharge. However, a federal judge recently blocked those reforms following a lawsuit filed by a for-profit college group that claimed the changes were unfair to schools.

This relief also comes just days before the federal student-loan payment pause is set to end. After more than three years, interest is beginning to accrue again on Friday, with bills becoming due one month later. To ease the process back into repayment, the department announced a 12-month "on-ramp" period during which missed payments would not be reported to credit agencies, along with a new income-driven repayment plan — known as the SAVE plan — intended to make monthly payments more affordable.

The department has also begun forgiving student loans for borrowers under a one-time account adjustment for borrowers on income-driven repayment plans, most recently wiping out balances of 804,000 borrowers who made the required 20 or 25 years of payments. It's set to continue to evaluate borrowers' accounts for relief every two months.

Read the original article on Business Insider