The Department of Education announced Wednesday it has approved the cancellation of about $500 million worth of federal student loans held by 18,000 borrowers who attended ITT Technical Institute. The borrowers will have 100% of their loans canceled.
"Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them," Education Secretary Miguel Cardona said in a statement. "Today's action is part of the Biden-Harris Administration's continued commitment to stand up for borrowers when their institutions take advantage of them. Many of these borrowers have waited a long time for relief, and we need to work swiftly to render decisions for those whose claims are still pending. This work also emphasizes the need for ongoing accountability so that institutions will never be able to commit this kind of widespread deception again."
While the Department of Education has previously approved student loan relief for students found to have been defrauded by for-profit institutions, the news marks the first time the agency has approved relief on the grounds that ITT misled students about their professional prospects and about their ability to transfer credits to other schools.
ITT closed in 2016. In September, 48 state attorneys general and the Consumer Financial Protection Bureau ruled that Peaks Trust, a private loan program run by ITT Tech and affiliated with Deutsche Bank entities, must forgo the collection of all outstanding education debt. The judgment resulted in over $330 million in private student-loan forgiveness for 35,000 former ITT students.
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In 2018, ITT's former chief executive, Kevin Modany, and former chief financial officer, Daniel Fitzpatrick, settled fraud cases with the Securities and Exchange Commission for allegedly deceiving investors. Neither Modany nor Fitzpatrick admitted or denied wrongdoing but agreed to pay penalties of $200,000 and $100,000, respectively.
The Education Department emphasizes that the recent actions are part of larger efforts to provide "targeted loan relief." In March, the Biden administration announced that some 72,000 borrowers who were defrauded by their schools will receive student loan forgiveness, totaling up to $1 billion.
Americans currently owe over $1.7 trillion in student loans. House and Senate Democrats repeatedly urged President Joe Biden to "broadly" forgive up to $50,000 of federal debt for all borrowers through executive order during his first 100 days in office. Such a policy would eliminate student debt for an estimated 93% of borrowers and would largely benefit borrowers from middle and lower wealth brackets.
Biden's first 100 days are now behind him and he has repeatedly pushed back against leaders of his own party, saying he will only support up to $10,000 of debt forgiveness and would prefer Congress to draw up the legislation.
Biden has also requested the Department of Education and the Justice Department craft a memo about the use of executive authority to cancel student loans.
Representatives for the Department of Education have confirmed to CNBC Make It that they are working on reviewing debt cancellation options and that the agency is seeking feedback on a variety of related topics.
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