Business

Biden Administration May Make It Easier for Defrauded Student Loan Borrowers to Get Forgiveness

Drew Angerer | Getty Images
  • The Biden administration is moving to make it easier for people who've been defrauded by their colleges to get their federal student debt forgiven.
  • Since President Joe Biden has been in office, the U.S. Department of Education has already canceled around $2 billion in student loans for more than 100,000 borrowers who have filed borrower defense to repayment applications, which allege fraud and deception against a school.

The Biden administration is moving to make it easier for people who claim they've been defrauded by their colleges to get their federal student debt forgiven.

Since President Joe Biden has been in office, the U.S. Department of Education has canceled around $2 billion in student loans for more than 100,000 borrowers who have filed "borrower defense to repayment" applications, which allege fraud and deception against a school.

That relief is a sharp turnaround from the Trump administration tenure of former Education Secretary Betsy DeVos, during which tens of thousands of students' debt cancellation requests were rejected despite their claims that their schools engaged in misconduct.

"Very few claims were processed during the Trump administration, other than perfunctory denials," said higher-education expert Mark Kantrowitz. "The Biden administration has made more progress, but there's still a large backlog."

More from Personal Finance:
Soaring gas prices are forcing some Uber, Lyft drivers off the road
How states aim to tackle high gas prices
Why a federal gas tax holiday won't save consumers much

Now changes to the borrower defense to repayment application, which were negotiated by a committee of stakeholders arranged by the Education Department, could make the process friendlier to borrowers. Possible amendments include expanding the timeline a borrower can submit a claim and making it easier to document the fraud they experienced. 

There is also a proposal to forgive entire groups of students from certain schools that are proven to be problematic, instead of requiring a borrower to individually make the case that they were harmed.

"A key problem with the borrower defense to repayment is a requirement for a case-by-case review, even when the same issues apply to multiple borrowers," Kantrowitz said.

These changes could be published by the Education Department as early as this spring for public comment.

The administration is under pressure to go beyond forgiving the debt of defrauded borrowers.

On the campaign trail, Biden had promised to cancel $10,000 of federal student loan debt for all.

Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., are pushing him to cancel closer to $50,000 per borrower.

Nearly 66% of likely voters are in support of the president forgiving student debt, with more than 70% of Latino and Black voters in favor, a recent poll found.

Speaking about broad student debt cancellation on Wednesday at a virtual summit held by the Student Debt Crisis Center, Schumer said that the White House "seems more open to it than ever before."

Most recently, the Biden administration extended the ongoing payment pause for federal student loan borrowers for another four months, until September, having said earlier that it wanted to make its decision on forgiveness before it resumes the bills.

Copyright CNBCs - CNBC
Contact Us