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Biden administration proposes canceling $6B in student debt for 200,000 people in settlement


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The Biden administration this week agreed to cancel about $6 billion in federal student debt for about 200,000 people who attended schools that they say defrauded them.

The Department of Education said it would wipe the debt for the borrowers in a proposed settlement filed in federal court Wednesday. The settlement addresses a class-action lawsuit filed in 2019 that has accused the Trump administration and Biden administration of delaying solutions for borrowers who filed for relief.  

The proposed settlement will need to be approved by a judge, and a hearing has been scheduled for next month.

In addition to canceling debt, the agreement would refund borrowers for money they paid to the Department of Education and offer credit repair options.

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The deal would reverse 128,000 “denial notices” sent to people during the Trump administration who were applying for relief, according tomultiple reports.

The agreement would help people who attended dozens of different schools, which are mostly for-profit colleges and other vocational programs. The schools include the University of Phoenix, DeVry University and others.  

The department said in the proposed settlement it determined that attendance at the schools “justifies presumptive relief, for purposes of this settlement, based on strong indicia regarding substantial misconduct by listed schools, whether credibly alleged or in some instances proven, and the high rate of class members with applications related to the listed schools.”  

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Education Secretary Miguel Cardona said in a statement Wednesday: “We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.” 

The move comes after officials announced this month that people who borrowed money to attend a school owned by Corinthian Colleges will have federal student loan debt canceled. The discharge amounted to $5.8 billion in relief for more than half a million borrowers.

Payments for federal student loans remain frozen during the coronavirus pandemic, though the freeze is set to lift at the end of August.  

It also comes as President Joe Biden is considering wider student loan forgiveness. He supported forgiving up to $10,000 of student debt for each borrower during his presidential campaign, though he has also said widespread loan forgiveness would need to come from Congress.  

Contributing: Chris Quintana, USA TODAY