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Education Dept. agrees to cancel $150M in student debt after failed legal challenge

By Nicholas Sakelaris
Education Secretary Betsy DeVos lost a fight to overturn an Obama-era rule that forgives student debt if they attended a for-profit college that shut down. File Photo by Oliver Contreras/UPI
Education Secretary Betsy DeVos lost a fight to overturn an Obama-era rule that forgives student debt if they attended a for-profit college that shut down. File Photo by Oliver Contreras/UPI | License Photo

Dec. 14 (UPI) -- Thousands of student loans totaling $150 million could be forgiven if the borrower was defrauded or attended one of the for-profit colleges that were shut down this month, the U.S. Department of Education said.

The Trump administration said Thursday it will cancel the debts, in accordance with a federal court ruling in September.

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The department began notifying affected borrowers Friday, informing them the company that handles billing will discharge some or all of the outstanding debt in the next few months. Some discharges may take longer than 90 days, it said.

Education Secretary Betsy DeVos fought an Obama-era rule that allowed the debt to be wiped out, but the September ruling said the department doesn't have legal authority to stop the "borrower defense" regulation from taking effect.

This month, dozens of for-profit college campuses nationwide were forced to close after parent company Education Corporation of America lost its accreditation and funding.

Under the regulations, a borrower is eligible for an automatic discharge if the borrower was enrolled when the school closed, withdrew fewer than 120 days before it closed and didn't enroll at another Title IV-eligible school within three years.

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Senate education committee chair Patty Murray, D-Wash, said the decision affects more than 100,000 students.

"It's disappointing that it took a court order to get Secretary DeVos to begin providing debt relief to students left in the lurch by predatory for-profit colleges but I am pleased the department has finally started implementing this rule and that some of the borrowers who attended schools like Corinthian Colleges and ITT Tech are finally getting their loans canceled," Murray said.

DeVos said the rule is unfair to colleges and taxpayers because it makes it too easy for students to have their debt removed. She's working toward a more restrictive policy. Murray said she will oppose any additional changes, and called for DeVos to "abandon her attempts to rewrite the borrower defense rule to let for-profit colleges off the hook" and instead "provide relief to more than 100,000 borrowers who were cheated out of their education and savings."

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