About $500 million worth of student loans for 18,000 former ITT Tech students will be canceled by United States President Joe Biden's administration after the for-profit college closed down, the latest step in the Democratic leader's address of Trump's leftover backlog of more than 100,000 forgiveness claims.
In 2016, ITT Tech shut down after it was discovered that school officials misled students about how much money they could earn after they graduated, federal funding showed. The establishment also falsely claimed the ability to transfer credits, the Department of Education said on Wednesday.
The incident comes after three months when Biden's administration announced the canceling of $1 billion in student loan debt for nearly 73,000 students. This was set to be given to students who were defrauded and received only partial loan forgiveness and eligible for relief under former Education Secretary Betsy Devos.
Student Loan Forgiveness
The policy, which is known as "Borrower Defense," will allow students who have been defrauded by their college to apply for debt relief. Former President Barack Obama's administration simplified the process when large for-profit colleges, such as Corinthian and ITT Tech, closed down, CNN reported.
One of the affected students, Morgan Marler, had difficulty landing a job after graduating from ITT Tech with an associate's degree in information technology last 2016. Her credits are not accepted by other schools and she is wary of taking on more debt to pursue another degree.
After Marler's husband decided to rejoin the army, she stayed at home taking care of their daughter. With the department's announcement, the mother is looking forward to some good news coming her way. She said she has been waiting for years and won't be satisfied until she gets an official letter.
The announcement hopes to give thousands of borrowers a fresh start as the relief they could receive will help them in their lives after they were lied to by ITT, Education Secretary Miguel Cardona said in a statement. He added they are working quickly to provide necessary relief to pending applications.
The announcement marks the first time the government approved relief based on how ITT allegedly took advantage of its students, misleading them about their professional aspects and credit transfer abilities to other schools.
Cases of Fraud and Deceit
Kevin Modany, ITT's former chief executive, and Daniel Fitzpatrick, former chief financial officer, settled fraud cases in 2018 with the Securities and Exchange Commission for their alleged deceit of investors. Neither of the two suspects admitted or denied allegations but paid penalties of $200,000 and $100,000 respectively, CNBC reported.
The Department of Education's statement said it would notify borrowers of the approval of their claims in the next few weeks. Until then, the department will continue to cancel loan balances for unfairly treated borrowers.
While only a tiny fraction of student loan debt is affected by the most recent cancellation, advocates for student loan borrowers continue to call for politicians to address the issue and implement more widespread student loan forgiveness, Forbes reported.