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US Dept. of Ed Changes Course on Debt Relief for some Student Loan Borrowers

The U.S. Department of Education is changing directions on debt relief for some student loan borrowers.

The DOE announced last week that it plans to streamline debt relief determinations for borrowers with claims approved to date in instances where the institution engaged in certain misconduct. This means the DOE is rescinding the formula for calculating partial relief and adopting a streamlined approach for granting full relief under the regulations to borrower defense claims approved to date.

The Department anticipates this change will ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellation.

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Secretary of Education Miguel Cardona. “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.”

Current provisions in federal law called “borrower defense to repayment” or “borrower defense” allow federal borrowers to seek cancellation of their William D. Ford Direct Loan (Direct Loan) Program loans if their institution engaged in certain misconduct. Beginning today, the Department will ensure that borrowers with approved borrower defense claims to date will have a streamlined path to receiving full loan discharges. This includes borrowers with previously approved claims that received less than a full loan discharge.

Full relief under the regulations will include:

  • 100 percent discharge of borrowers’ related federal student loans.
  • Reimbursement of any amounts paid on the loans, where appropriate under the regulations.
  • Requests to credit bureaus to remove any related negative credit reporting. And,
  • Reinstatement of federal student aid eligibility, if applicable.

This new approach replaces a methodology first announced in December 2019 to determine the amount of relief granted to borrowers with approved claims. After completing a comprehensive review of that methodology, the Department determined that it did not result in an appropriate relief determination.

This is the Department’s first step in addressing borrower defense claims as well as the underlying regulations. The Department will be pursuing additional actions, including re-regulation, in the future.

The Department will begin applying this new approach immediately and affected borrowers will receive notices from the Department over the next several weeks with discharges following after that.

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