DeVos cancels $ 150 million in student loan debt after losing court battle

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A federal judge ruled in September that Betsy DeVos’ efforts to prevent the 2016 “defending borrowers” regulations from coming into force were illegal. | Saul Loeb / AFP / Getty Images

The Trump administration announced Thursday it would cancel thousands of federal borrowers student loans, implementing an Obama-era policy that Education Secretary Betsy DeVos fought to kill.

The move comes as DeVos is forced to implement a set of regulations that create more protections for student loan borrowers who have been affected by a school closure or defrauded by their college.

A federal judge ruled in September that DeVos’ efforts to prevent the 2016 “defending borrowers” regulations from coming into force were illegal. And in October, the same judge rejected an offer by for-profit colleges to immediately stop the regulations, paving the way for them to come into effect.

Education Ministry officials said on Thursday they would cancel loans of about 15,000 borrowers who qualified for the release of “closed school” loans but had not yet claimed the benefit. These student loans total approximately $ 150 million.

Department officials said they would begin notifying borrowers by email on Friday that they will receive loan discharges. Borrowers won’t have to take any action, but the process could take up to 90 days.

About half of the borrowers who will now receive a loan discharge attended campuses owned by Corinthian Colleges, the for-profit college chain that went bankrupt in 2015. The remaining students attended other schools that closed between the 1st. November 2013 and December 1, 2013. 4, 2018.

The department said some of the loans that will be canceled are PLUS loans owed by parents whose students have attended schools that have closed.

The loan cancellations also come after a California consumer group sued DeVos in November for failing to automatically cancel federal student loans under the 2016 “borrower defense” rules.

Senator Patty Murray, the top Democrat on the Senate Education Committee, said she was “happy” the department decided to pay off the loans, but called on the Trump administration to go further .

“It’s a good first step, but it’s not enough,” said Murray (D-Wash.) And instead fully implement the current rule and provide relief to over 100,000 borrowers who have been deprived their studies and their savings. “

DeVos said the Obama-era rules are unfair to colleges and taxpayers because they allow students to write off debt too easily. She proposed, but not finalized, a more restrictive policy that would limit the amount of loan forgiveness borrowers receive.

Federal law allows borrowers who attended – or recently retired from – a school that is closing to write off their debt, as long as they don’t transfer their credits elsewhere.

Prior to the 2016 regulations, borrowers had to file an application for the loan to be released. In changing the policy, the Obama administration said it wanted to make the process automatic due to the low rate at which borrowers eligible for loan discharges claimed the benefit.

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