The Department of Education announced Friday that it would cancel the debt of 1,800 students who were scammed by their schools, resulting in $55.6 million in relief.
Though Friday’s action will apply to a small slice of borrowers who have been impacted by the for-profit college industry, it expands the list of schools whose conduct the agency found entitled borrowers to relief.
Borrowers are entitled to have their debt discharged if they’ve been scammed by their schools, through a process known as borrower defense, but previously the Department had only approved claims from students who attended Corinthian Colleges, ITT Technical Institutes and American Career Institute.
Friday’s announcement impacts students who attended Westwood College, Marinello Schools of Beauty and Court Reporting Institute — the first new schools from which claims were approved since 2017.
The announcement impacts students who attended Westwood College, Marinello Schools of Beauty and Court Reporting Institute — the first new schools from which claims were approved since 2017.
In the past, approval of borrower-defense claims was based on evidence uncovered by state attorneys general and other law enforcement agencies, but in the case of Marinello, the Department used evidence it had collected in the course of monitoring schools for compliance with federal financial aid laws — a step advocates called for last year.
“The Department will continue doing its part to review and approve borrower-defense claims quickly and fairly so that borrowers receive the relief that they need and deserve,” Secretary of Education Miguel Cardona said in a statement. “We also hope these approvals serve as a warning to any institution engaging in similar conduct that this type of misrepresentation is unacceptable.”
But the agency is facing pressure to do more. Hundreds of thousands of borrowers who attended for-profit colleges are still waiting for answers on their claims seeking relief. Advocates say that former ITT students alone have an estimated $3 billion in debt that the Department should address.
It also comes as debate continues to rage over whether the Biden administration should cancel some or all of the roughly $1.7 trillion in outstanding student debt.
How were students misled?
Friday’s announcement is the latest in a years-long battle over the fate of students who were scammed by their schools. Borrowers have had the right to have their debt cancelled in cases where they’ve been misled by their schools since the 1990s, but the authority was rarely used until 2015 in the wake of Corinthian’s fall.
Former students at Corinthian and other for-profit colleges, organized by activists, began flooding the Department with claims for debt relief. In response to that pressure, the Obama administration created a streamlined process in 2016 that borrowers could use to apply to have their debt discharged based on claims they were misled by their schools.
The Department found that the now-shuttered schools involved in Friday’s announcement deceived their students in a number of ways. In the case of Westwood College, the Department found the school misrepresented students’ ability to transfer credits and the likelihood that their criminal justice program would result in a job in law enforcement. At the Court Reporting Institute, students were misled about the time it would take to complete their court reporting program, the Department found.
The agency found that Marinello misrepresented the type of education students would receive there. For example, students allegedly weren’t taught to cut hair as part of a cosmetology program.