Largest Debt Cancellation Ever: $5.8 Billion In Student Loans For 560,000 Borrowers

There’s been mounting pressure on President Joe Biden and his administration to follow through on a large campaign promise to reduce, or outright cancel, student debt for people with federal student loans. While the administration continues to debate if, or how they’re going to do that, the Education Department issued its largest student loan forgiveness action yet. More than half a million borrowers now qualify for student debt cancellation totaling $5.8 billion — here’s what you need to know.

According to The New York Times, the Education Department said it’s moving forward with wiping out $5.8 billion in student loans for 560,000 people who borrowed funds to attend Corinthian College. The college was once one of the nation’s biggest for-profit college chains.

Corinthian College opened in the mid-90s and acquired and ran several schools throughout the country with more than 100 campuses and once had 110,000 students enrolled. Since it closed, Corinthian College became one of the most known examples of for-profit colleges reportedly taking advantage of its students.

“Allegations of illegal recruiting tactics, shoddy educational programs, and false promises to students about their career prospects and potential future earnings shadowed the company for years,” The New York Times reports.

This led to a slew of lawsuits and investigations by federal and state agencies which found the college had enrollment policies that were “designed to rake in profits” by targeting vulnerable populations like military veterans, single parents, and low-income workers.

As those lawsuits and investigations continued, enrollment dropped significantly, resulting in Corinthian College shutting its doors, and in doing so, stranding students who were mid-degree. That left thousands more with debt that continued to accrue despite not completing their programs.

“For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep,” Education Secretary Miguel Cardona said. And now after years of advocacy by several former students of the college, student loan forgiveness is now coming through.

Who qualifies for the student loan forgiveness related to Corinthian College?

Anyone who attended Corinthian College in its 20-year existence will qualify to have their student loan forgiven. The Education Department will eliminate any remaining balance on federal student loans. In addition, those who made payments on the federally owned loans will receive refunds for their past payments, The New York Times explained.

The canceling of debt will be automatic, too, which means former students from Corinthian Colleges will not need to apply to have their debts forgiven.

What’s next for student loan forgiveness?

The Biden administration hasn’t solidified any sweeping student loan forgiveness plans as of yet. They’re said to be ruminating over whether to put income caps in place for those who would qualify, and reports suggest that there is unlikely to be widespread debt forgiveness, and instead a $10,000 per person cap for those who qualify.

In the meantime, tens of thousands of borrowers and people who have defaulted on their student loans are in limbo waiting for the administration to follow through on campaign promises.