- The Education Dept. said defrauded borrowers with approved claims are entitled to full student-debt relief "as a starting point."
- It also said it will not be creating a new way to process claims, scrapping a "flawed" methodology.
- Under Betsy DeVos, many defrauded borrowers only got partial student-debt relief.
- See more stories on Insider's business page.
Education Secretary Miguel Cardona in March reversed a methodology created under President Donald Trump's administration that gave only partial student-debt relief to borrowers defrauded by for-profit schools.
The Education Department confirmed on Tuesday it will not be creating a new methodology, and instead, will presume defrauded borrowers' approved claims are entitled to full relief, unless evidence suggests otherwise.
The "borrower defense to repayment" – approved by Education Secretary Betsy DeVos – compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive. But compared to a 99.2% approval rate for defrauded claims filed under President Barack Obama, DeVos had a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness.
The Federal Student Aid (FSA) office wrote in an announcement that prior to the implementation of DeVos' methodology, the department granted full relief to defrauded borrowers with approved claims and didn't require any further information, and borrowers may not have been aware of the additional steps they had to go through to get student-debt relief.
Going forward, the department will "use a presumption of full relief as the starting point, and will reduce the amount of relief provided in a manner consistent with the applicable regulations if warranted by evidence provided by the school, the borrower, or other sources."
As Insider previously reported, Cardona has canceled over $1.5 billion in student debt for about 92,000 borrowers defrauded by for-profit schools. In March, along with getting rid of DeVos' methodology, he gave about 72,000 borrowers $1 billion in student-debt relief.
On June 16, Cardona cancelled student debt for 18,000 additional borrowers defrauded by ITT Technical Institutes, totaling to about $500 million in debt relief, and on July 9, Cardona cancelled student debt for 1,800 borrowers who attended the for-profit schools Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute.
A series of for-profit schools have closed down over the past decade over accusations of misleading students and pushing them to take out loans they cannot pay off, and Biden's administration is working to reform the claims process and give those borrowers the relief they deserve.
"Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution's misconduct," Cardona said in a March statement. "A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt."