The U.S. Department of Education announced on Wednesday, June 1, that it had canceled about $5.8 billion in outstanding student loans for more than 560,000 borrowers in the largest single loan forgiveness action taken by the U.S. government to date.
The student loan cancellation applies to all those who attended schools operated by the now-defunct Corinthian Colleges, one of the largest for-profit education companies that filed for Chapter 11 bankruptcy back in 2015.
Corinthian Colleges has faced several lawsuits since it was founded in 1995, the most notable of which happened in 2013, when now U.S. Vice President Kamala Harris sued the company while she was attorney general of the state of California for "deceptive and false advertising and recruiting" among other allegations, according to the department.
Student loan forgiveness will be automatic
U.S. Secretary of Education Miguel Cardona issued a statement, saying "As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans."
The department said that qualifying borrowers won't need to fill out the application to receive the relief. The loan forgiveness will be automatic, and the students eligible for the cancellation are expected to be notified within weeks, according to Politico.
Wednesday's news comes as the Biden administration considers broader student loan forgiveness for millions of borrowers in the United States. The Biden administration has approved $25 billion in loan forgiveness thus far for about 1.3 million borrowers.
While some economists and politicians hailed the move of the Biden administration as a step in the right direction toward addressing the massive $1.7 trillion student debt crisis, millions of borrowers have yet to see relief and are beginning to wonder when, and if, their loans will be forgiven.
Student loan repayment pause to be extended until August 31, 2022
According to a report by CNBC, White House officials are zeroing in on canceling $10,000 for all borrowers in the U.S. who earn less than $150,000 per year. That is still up in the air, though, with the Biden administration not yet confirming such plans.
The Department of Education issued a ruling back in April, extending the pause on student loan repayment, interest and collections through August 31, 2022. Michelle Dimino, a senior education policy leader at Third Way, predicts that payment pause will be extended yet again through the end of the year, at least until after the midterm elections this coming November.
Cardona and other top White House officials have also made it clear that they are comfortable extending the pause on student loan repayment during interviews. Cardona told Cox Media Group back in April that they are going to continue to monitor the situation and will be comfortable moving the set August 31 date if needed.
Dimino expects that more defrauded borrowers will see their debt reduced or canceled soon, especially those who qualify for a closed school loan discharge or with pending borrower defense claims. They are people whose school closed while they were enrolled, or they could not complete their program because of the closure.
