President Joe Biden will cancel an estimated $6 billion in federal student loan debt for about 200,000 borrowers who have been defrauded by their colleges.
Students who applied for relief will have their loans excused if they attended one of more than 150 schools named in a class-action settlement. Almost all of the schools are for-profit colleges and vocational programs, The New York Times reported.
Among the institutions are such schools as the University of Phoenix, Grand Canyon University, DeVry University, The Art Institute, ITT Tech, and Westwood College.
Many of the students who attended these for-profit schools found themselves saddled them with large bills for a “subpar education,” the Times reported.
The class-action lawsuit was filed in 2019 over the department’s handling of the claims put in by students seeking relief from major student loan debt.
The new deal was agreed to by the plaintiffs and the Department of Education as part of a proposed settlement agreement that was filed in federal court on June 21. A judge still needs to sign off, which is expected to happen before Aug. 31, when the pandemic-related pause on federal student loan payments ends.
If all goes ahead, about 200,000 borrowers will automatically get full debt relief, according to the proposed settlement agreement. An additional 64,000 borrowers have already filed borrower defense claims, and they may also be eligible for debt relief under the proposed settlement.
“This momentous proposed settlement will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government,” Eileen Connor, director of Harvard Law School’s Project on Predatory Student Lending, told CNN. Harvard Law School’s Project on Predatory Student Lending represented the borrowers in the lawsuit.
The administration previously approved $25 billion in loan forgiveness for 1.3 million borrowers.
Black students carry disproportionately high student loan debt. Black women had the largest average student loan debt in 2021, owing an overall debt of $41,466, Investopedia reported.