The Biden administration on Wednesday announced the largest student loan forgiveness step by the Education Department with the cancellation of $5.8 billion in federal student loans for hundreds of thousands of students who attended schools affiliated with Corinthian Colleges.
The action will erase debt for about 560,000 borrowers who enrolled in the for-profit Everest, Heald and WyoTech colleges, which Corinthian owned or operated before it folded in 2015 following an investigation by the Education Department.
Borrowers do not need to take any action to have their loans forgiven, the agency said.
In a news release Wednesday, the Education Department said it is “also working on new regulations that will permanently improve a variety of the existing student loan relief programs, significantly reduce monthly payments, and provide greater protections for students and taxpayers against unaffordable debts.”
An investigation the Education Department led in 2014 found that Corinthian Colleges misled students by inflating its job-placement rates. The company, which once operated 105 campuses in 25 states, effectively collapsed in 2015 and was forced to close or sell its campuses after the Education Department began withholding federal loan funds.
“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 in a statement Wednesday.
"While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions — and the corporations that own them — never again get away with such abuse,” he added.
The Biden administration has taken other steps to erase debt for certain borrowers, but no decision has been made about broader debt cancellation. President Joe Biden said in late April he was weighing student loan forgiveness but not considering canceling $50,000 per borrower. On the campaign trail, Biden said he favored an amount closer to $10,000.