On June 16, 2021, the Department of Education Secretary Miguel Cardona announced over $500 million in federal student loan debt forgiveness for 18 thousand borrowers who attended ITT Technical Institute.
"Our action today will give thousands of borrowers a fresh start and the relief they deserve," Cardona said in a statement. "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."
Here's what you need to know.
What is ITT Tech
Before closing in 2016, ITT Educational Services, Inc. had operated for 50 years as a trade school under the name ITT Technical Institute. It shut down operations while being investigated by more than a dozen state attorneys generals and two federal agencies for violating state consumer protection laws. The AGs alleged the school engaged in:
- deceptive marketing
- pervasive misrepresentation of the value of its education
- steering students into predatory loans.
The school later filed for bankruptcy protection to liquidate its business.
Why loans are being forgiven
The Department of Education decided to extend loan forgiveness to former ITT Tech students for two reasons.
First, a 2012 congressional report revealed, and the Department confirmed, that ITT Tech made repeated and significant misrepresentations to students related to how much they could expect to earn and the jobs they could obtain after graduation between 2005 and the institution's closure in 2016.
Second, the Department found that ITT Tech misled students about their ability to transfer their credits to other institutions from January 2007 through October 2014. In reality, students were rarely able to transfer credits. Consequently, students made little to no progress along their educational journey. Yet, they were saddled with student loan debt from their time at ITT.
What is Borrower Defense to Repayment
The Borrower Defense to Repayment Program offers a path to loan forgiveness for students who borrowed federal student loans from a school that engaged in fraudulent or illegal activity.
The Education Department launched this program under the Obama Administration following the closure of Corinthian Colleges.
Initially, over 72 thousand borrowers were slated to get their federal student loan debt forgiven under this program. But the Trump Administration, specifically former Education Secretary Betsy DeVos, blocked efforts to give those students a fresh start at student loan relief.
Since taking office, the Biden Administration has worked to change that.
You can submit a Borrower's Defense Application at the Federal Student Aid website, studentaid.gov.
Download: BDR Discharge Application
Initially, loan forgiveness was expected to be limited to former ITT students who attended ITT Tech campuses in California. However, under the Biden Administration, forgiveness will be extended to ITT Tech students no matter which campus location they attended.
What loans are eligible
Federal student loans directly owned by the Department of Education are eligible. This includes all Direct Loans.
Under federal law, borrowers with Federal Family Education Loan Program Loans (FFEL), Perkins Loans, and several less common types of federal student loans can gain eligibility for student loan forgiveness under the BDR program if they consolidate their loans into a Direct Consolidation Loan.
When will loans be forgiven?
The Department of Education will begin forgiving eligible student loan debt over the next several weeks.
What to do
At this time, if you believe you're eligible for loan forgiveness because you attended ITT Tech, there's nothing you need to do. The Department of Education will notify eligible borrowers over the next few weeks.
What to thank for loan forgiveness
There are many parties and government agencies to thank for loan forgiveness, including:
- A bipartisan coalition of Attorney Generals from the District of Columbia and the following states for the Application for Borrower Defense they submitted on behalf of former ITT Tech Students: Connecticut, Hawaii, Idaho, Illinois, Iowa, Kansas, Massachusetts, Maryland, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Vermont, Virginia, Washington, and Wisconsin.
- the Consumer Financial Protection Bureau
- Veterans Education Success
What about my school
Borrowers who attended Art Institute, DeVry, University of Phoenix, and other schools accused of similar actions as ITT Tech may be wondering when or if their loans will be forgiven.
Unfortunately, I don't know if your loans will be forgiven. I know there are advocates and consumer protection groups working to help borrowers in similar situations as the former ITT Tech students. But I don't know when their efforts will pay off.
Loan forgiveness under the Borrower Defense to Repayment Program has been slow. My hope is that it picks up pace before the Biden Administration exits office.