It’s not large-scale student loan forgiveness, but it’s something: A small group of borrowers are set to have their outstanding debt canceled.
The group includes thousands of borrowers who attended Colorado-based locations of CollegeAmerica, a now-closed for-profit college that was run by an organization known as Center for Excellence in Higher Education (CEHE).
The announcement Tuesday follows years of legal challenges and investigations into the CEHE, which was found to have enrolled students using false marketing and a predatory loan scheme, among other practices.
In all, 7,400 students who enrolled in CollegeAmerica’s Colorado campuses at some point between Jan. 1, 2006 and July 1, 2020 will receive $130 million in automatic debt relief. Any loan payments already made to the Education Department will also be refunded.
In a call with reporters, Federal Student Aid’s Richard Cordray and Colorado Attorney General Phil Weiser touted the state-federal partnership in securing the relief. It comes after the Education Department agreed to a $6 billion settlement forgiving the loans of hundreds of thousands of people who were defrauded by several for-profit or otherwise predatory schools. Officials indicated they would soon be announcing similar state-federal partnerships, which could mean relief for other defrauded students as well.
For defrauded borrowers,the Supreme Court greenlit student loan forgiveness. What’s next?
Biden keeps spotlight on student loan relief victories
The Supreme Court last month struck down President Joe Biden’s original plan for providing up to $20,000 in student loan debt relief for tens of millions of Americans. The administration is pursuing an alternative avenue for making that happen.
As Biden navigates those roadblocks, borrower defense has emerged as a politically valuable cause.
Borrower defense to repayment is when student loan borrowers who are defrauded by their schools have their loans discharged. The process is designed largely to support former students of for-profit colleges who default on their loans and struggle to find employment at much higher rates than their counterparts at other types of higher-education institutions.
“These borrowers were lied to, ripped off, and saddled with mountains of debt,” Biden said in a statement on Tuesday’s action. “While my predecessor looked the other way when colleges defrauded students and borrowers – I promised to take this on directly, and provide borrowers with the relief they need and deserve.”
The CollegeAmerica relief, he stressed, is the latest example of $14.7 billion total the administration has forgiven for borrowers whose colleges preyed on students or closed abruptly. Biden also pointed to other loan discharges the administration has facilitated through programs such as public service loan forgiveness.
“As long as I am president, we will never stop fighting to deliver relief to borrowers, hold bad actors accountable, and bring the promise of college to more Americans,” Biden said.
It’s going to be a while:Biden has another plan for mass student loan forgiveness.
What happened with CollegeAmerica?
Here’s what the federal Education Department concluded after reviewing mounds of evidence in conjunction with the state of Colorado:
- CEHE promised prospective CollegeAmerica students that they would earn high salaries when in fact graduates earned just $25,000 on average five years out of school. That’s less than the income of workers with only high school diplomas as publicized by CollegeAmerica.
- CollegeAmeria’s Colorado campuses used inflated and false job placement rates in their advertising.
- Despite high default rates on its private loans, CEHE told students it was “affordable.”
- CEHE falsely told students its Colorado CollegeAmerica locations offered certain programs or that certain programs would guarantee employment in a given field.
Both CollegeAmerica and CEHE have since shuttered. The institutions’ one-time accrediting agency did not immediately respond to a request for comment.
Individuals who are eligible for this borrower defense action will have the entire balances on their federal student loans zeroed out. They will be notified in August.
The Education Department is also encouraging other states to share evidence of wrongdoing by colleges in their communities.
