Education Department Cancels Another $4.2 Billion in Student Loan Debt

US President Joe Biden speaks about student loan relief at Madison College in Madison, Wisconsin, on April 8, 2024. Photo by ANDREW CABALLERO-REYNOLDS / AFP

In the final days of his term, President Joe Biden announced the cancellation of federal student loan debt for more than 150,000 more borrowers.

The latest round of relief provides $1.26 billion for 85,000 individuals who attended schools that allegedly “cheated and defrauded their students;” $2.5 billion for 61,000 borrowers with total and permanent disabilities; and $465 million for 6,100 public service workers, the U.S. Department of Education said on Monday.

This latest action brings the total student loan debt canceled since Biden took office to $183.6 billion, benefiting more than 5 million Americans, according to the White House.

“I’m proud to say we have forgiven more student loan debt than any other administration in history,” Biden said in the statement.

Much of Monday’s relief is facilitated through a program called borrower defense, which allows students to apply for debt discharge if their colleges use misleading advertising or otherwise commit fraud.

A legal battle over borrower defense reached the U.S. Supreme Court on Friday when justices agreed to review the Biden administration’s borrower-defense rule, which simplified the application process for affected borrowers and allowed automatic debt discharges in some cases.

The borrower defense provision has existed since 1995 but was rarely used until after 2015, when Corinthian Colleges, a prominent for-profit education chain, went out of business. The collapse prompted widespread complaints from former students burdened with large amounts of debt.

In response, the Education Department issued a rule in 2016 that established a formal process for borrowers to apply for loan discharges. In 2019, Education Secretary Betsy DeVos revised the rule to tighten eligibility criteria and limit the amount of relief that borrowers could receive, assuming they had gained at least some value from their education.

Then-President Donald Trump supported this tightened approach. In 2020, as the Education Department began processing a massive backlog of borrower defense claims, Trump vetoed a bipartisan resolution that would have halted the 2019 rule, saying it would undermine students’ ability to make educational choices that best suit their needs.

In 2022, the Biden administration finalized a new borrower-defense rule designed to provide full relief to borrowers who had received partial forgiveness under the DeVos-era policy. However, the rule has been put on hold since the summer of 2023, following a ruling by the U.S. Court of Appeals for the Fifth Circuit.

That court granted a preliminary injunction in April, citing “numerous statutory and regulatory shortcomings” in Biden’s policy. The appellate judges also called some provisions “certainly unlawful” and criticized the rule’s “vague, brand new standards” for holding colleges accountable.

“The unbridled scope of these prohibitions enables the department to hold schools liable for conduct that it defines only with future ‘guidance’ documents or in the course of adjudication,” the judges wrote in their opinion. “Simply put, the statute does not permit the department to terrify first and clarify later.”

The Supreme Court has yet to say when it will hear oral arguments.