Biden admin pledges to forgive 1.1 billion in student loan debt, and it’s just the beginning

The Biden administration has pledged to cancel $1.1 billion in student loan debt for around 115,000 borrowers who attended the now-defunct ITT Technical Institute. The Dept. of Education said in a statement that ITT was guilty of “malfeasance” during the period from March 31, 2008, to its permanent closure in 2016.

The department concluded that borrowers were misled as to the financial state of the institute and that it encouraged students to take on “unaffordable private loans that were allegedly portrayed as grant aid.”

“ITT’s malfeasance drove its financial resources away from educating students in order to keep the school in business for years longer than it likely would otherwise have, resulting in debts that are being discharged starting today,” the agency said.

Education Secretary Miguel Cardona decided to extend the relief window to March 2008 after investigating the school’s bankruptcy proceedings, its filings with the Securities and Exchange Commission, and other causes that led to the closure of the institution. Referring to it as a company, the agency said the March 31st date was when its leadership “publicly disclosed the start of a financial scheme that kicked off a series of misrepresentations to hide the true nature of the school’s finances following a public loss of outside financing.”

This latest round of debt relief comes as the Biden administration moves forward with plans to cancel $9.5 billion in student debt, though they will likely discriminate as to who gets what. Very recently, $5.8 billion in loan forgiveness was granted to students with permanent or temporary disability, as determined by the Social Security Administration. Beginning in September, those borrowers will now receive automatic discharges of their debt, whereas they previously needed to complete an application for relief.

Cardona said the move by the agency to cancel more than $1 billion in debt for former ITT students continues its commitment to “improve and use its targeted loan relief authorities to deliver meaningful help to student borrowers. At the same time, the continued cost of addressing the wrongdoing of ITT and other predatory institutions yet again highlights the need for stronger and faster accountability throughout the federal financial aid system,” he added.

Progressives have continued to urge the Biden administration to cancel all student debt, although House Speaker Nancy Pelosi (D-CA) has demurred. Needless to say, President Biden doesn’t seem to believe the U.S. Constitution applies to his administration, and if the move to cancel such debt is struck down in the Supreme Court, he will likely attempt to ram it through via executive order.

However, the ITT decision is likely to survive any legal challenges because the forgiveness stems from malfeasance on the school/company’s part, rather than poor decision-making on the student’s part.

Student loan forgiveness has its many detractors, and proponents who praise the decision tend to be the same people who neglect the fact that banks and lenders still need to get their money, and that money must come from somewhere.

The moratorium on the $1.6 trillion in debt owed to the federal government will expire at the end of January 2022.

Frank Webster

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