If your alma mater has recently shut its doors, you could see your student loan debt be forgiven by the government. The Education Department recently announced on the Federal Student Aid official website that the new protocol applies to about 15,000 borrowers and some of them have already been informed that they no longer owe the government money due to the fact that their alma maters have closed their doors.
The new rules require the department to automatically forgive loans of eligible borrowers three years after the school has closed but students are able to apply before then. The closed school forgiveness program also allows borrowers to have their loans wiped away if they attended a school that closed while they were enrolled, or soon after, and they do not transfer their credits elsewhere.
The new rules are based on the principal that lenders are responsible for ensuring a degree is worth the debt a borrower is taking on to pursue it. In other words, borrowers no longer have to be responsible for debt for degrees that turn out to be worthless. Don’t side-eye your Philosophy degree just yet if you were just enjoying homecoming festivities as an alumni, the program only applies to schools that are now-defunct and closed between Nov. 1, 2013, and Dec. 4, 2018.
About half of the affected borrowers attended Corinthian Colleges, Inc. a chain that closed on April 27, 2015. In addition students who attended schools they believe to be fraudulent that are now closed can apply to have their loans forgiven as well.
Secretary of Education Betsy DeVos wasn’t exactly in favor of the ruling. In April she canceled memos published by the Department of Education under President Barack Obama that imposed tougher rules on how the federal government oversees student loan debt connected to for-profit colleges. California and other states sued. NBC News reports Senator Patty Murray of Washington stated its sad it took a federal ruling to get debtors some relief, but believes we still have a long way to go:
“It’s disappointing that it took a court order to get Secretary DeVos to begin providing debt relief to students left in the lurch by predatory for-profit colleges, but I am pleased the department has finally started implementing this rule and that some of the borrowers who attended schools like Corinthian Colleges and ITT Tech are finally getting their loans canceled. This is a good first step, but it’s not good enough.”
While it’s great to see that folks whose passion for higher education was manipulated by for-profit schools will soon see justice, I’m curious to see how their time, effort and energy will be repaid.