Over the last few months, the Department of Education has made a number of groundbreaking announcements that will provide debt relief to millions of people with student loans. In addition to the big announcement that most people with federal student loan debt can apply to have $10,000 to $20,000 of that debt cancelled, the Department has also announced it will fully cancel the debts borrowers took on to attend four large predatory schools– Marinello Schools of Beauty, Corinthian Colleges, ITT Tech, and Westwood College–without requiring those borrowers to apply. In addition, the Department has announced it will discharge the debts and provide refunds to borrowers covered by a group borrower defense application submitted by the Massachusetts attorney general which requested relief for borrowers who attended the Medical Assistant or Medical Billing and Coding programs at Kaplan Career Institute in Massachusetts between 2009 and 2012. The Department will discharge $14.5 billion in debts for 1.1 million borrowers who attended these four schools.
Providing automatic relief is a major, and welcome, shift in how the Department treats borrowers harmed by predatory schools. For the last seven years, the Department has rarely extended relief to borrowers unless they submitted complex applications that proved how their school harmed them. This imposed an unrealistic burden on most borrowers, who often have no idea that this type of relief program exists. Unaware of their eligibility for relief, borrowers harmed by their school struggle to make payments and often fall into default. The Department’s decision to automatically provide relief to eligible borrowers means that no eligible borrowers will fall through the cracks and continue to suffer from these unfair debts.
As more group discharges are announced, we will summarize the details here.
When do borrowers need to have attended the schools to receive automatic relief?
- ITT: Students who attended in 2005 through its closure in 2016.
- Corinthian: Students who attended a Corinthian-owned school between 1995 through its closure in 2015.
- Marinello: Students who attended between 2009 through its closure in 2016.
- Westwood: Students who attended in 2002 until its closure in 2016.
If a borrower attended one of these schools outside of the covered time period, they should consider submitting an individual application for borrower defense. (We discuss how to apply below.)
Which loan types are included in these group discharges?
Borrowers with outstanding Direct, FFEL loans, and Department-held Perkins loans (the most common types of federal student loans) borrowed to attend the four predatory schools will receive relief on those loans. All types of Direct and FFEL loans, including Parent PLUS loans, are included. Borrowers will have their eligible outstanding debt discharged and will have any adverse credit history related to these loans deleted from their account.
Borrowers with Department-held loans will also receive a refund of payments made on those loans (Department-held loans include all Direct Loans; more information about how to see whether a borrower’s loans are Department-held is available here.). However, borrowers who fully paid off their loans will not receive a refund of amounts paid.
- Note on refunds: Borrowers that attended a group discharge school and who submitted individual borrower defense applications before June 22, 2022—including borrowers with commercially-held loans and borrowers who paid off their loans—will be eligible for a refund if the settlement in the class action lawsuit Sweet v. Cardona receives final approval from the court. More information about that lawsuit can be found here.
When will this relief appear on borrowers’ accounts?
We don’t know for sure. However, in the coming months, borrowers should expect to see their outstanding balance discharged and adverse credit history deleted. Refund checks will likely take substantially longer. We do not know if all of these discharges will be processed before repayment restarts as scheduled on January 1, 2023, but Department officials have told us that eligible borrowers’ loans will be placed in forbearance–meaning borrowers will not have to make payments on them—until the loans are cancelled.
Borrower Tip: In the meantime, borrowers should verify their contact information on their studentaid.gov account and with their servicer account to make sure that they will receive any updates that the Department sends out and any refund checks.
Borrowers who attended other schools can apply individually for borrower defense relief.
If you attended a different school and are curious about how to apply for borrower defense cancellation, there are resources for you, including:
- Our primer on borrower defense
- Our summary of the Department of Education borrower defense findings (these findings outline misconduct that the Department has found particular programs at particular schools have engaged in, and the Department of Education will grant borrower defense applications from people who attended these programs and experienced this misconduct)
- A guide to submitting an individual application created by the New York Legal Assistance Group
- The Department of Education’s website for submitting a borrower defense claim.
We would love to hear from you about what this loan cancellation will mean in your life. Please share your story with us here.