The US Department of Education canceled about $5.8 billion in outstanding student loans for more than 560,000 borrowers in the largest single loan forgiveness action taken by the government to date, the department announced Wednesday.
The cancellation applies to all those who attended schools operated by the now-defunct Corinthian Colleges, one of the largest for-profit education companies that filed for Chapter 11 bankruptcy in 2015.
Corinthian Colleges has faced several lawsuits since its founding in 1995 — but perhaps the most notable is from 2013, when Vice President Kamala Harris sued Corinthian while she was attorney general of California for “deceptive and false advertising and recruiting” among other allegations, according to the department.
“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” US Secretary of Education Miguel Cardona said in a statement.
Qualifying borrowers won’t need to fill out the application to receive the relief, either: it will be automatic, and they are expected to be notified within weeks, the department said.
Wednesday’s news comes as the Biden administration considers broader student loan forgiveness for millions of borrowers — so far, the administration has approved $25 billion in loan forgiveness for about 1.3 million borrowers.
While some politicians and economists hailed the move as a step in the right direction toward addressing the $1.7 trillion student debt crisis, millions of borrowers have yet to see relief and are wondering when, and if, their loans will be forgiven.
Here’s what to expect with student loan forgiveness in the coming months:
The federal student loan pause will likely be extended through the end of 2022
White House officials are zeroing in on canceling $10,000 for all borrowers who earn less than $150,000 per year, CNBC reports, but the administration has yet to confirm such plans.
In April, the Department of Education extended the pause on student loan repayment, interest and collections through Aug. 31, 2022, but Michelle Dimino, a senior education policy leader at Third Way, predicts the payment pause will be extended yet again through the end of the year, at least until after the midterm elections.
A recent poll from Data for Progress and Rise found that voters might be less likely to vote in the midterms if the Biden administration fails to provide adequate relief to borrowers.
Cardona and other top Biden officials have also made it clear that they are comfortable extending the pause during interviews. “We’re going to continue to monitor it,” Cardona told Cox Media Group in April. “Right now, we have August 31 and as you’ve seen in the past, we’ve been comfortable moving that date if needed.”
More borrowers could see relief sooner
In the meantime, however, Dimino expects that more defrauded borrowers will see their debt canceled or reduced soon, especially those with pending borrower defense claims or who qualify for a closed school loan discharge, which means your school closed while you were enrolled, or you couldn’t complete your program because of the closure.
“The one thing we can, and do, expect from this administration at this point is a continued, concerted effort to help borrowers who are struggling the most and provide targeted relief,” Dimino adds. “The Department of Education is really charging ahead to get through that backlog of defrauded borrowers and give them the overdue relief that they’re entitled to.”
With student loan payments frozen until May, here’s how to use that money for a financial reset
If you hate budgeting, try the 80/20 rule to save money without tracking every single expense
Despite high-profile staff cuts, the job market remains ‘burning hot’ for workers
Sign up now: Get smarter about your money and career with our weekly newsletter