Biden to cancel nearly $6bn in student loan debt for Corinthian Colleges attendees

Joe Biden’s administration has moved to cancel $5.8bn in student loan debt held by borrowers who attended now-defunct Corinthian Colleges, a group of for-profit schools that faced federal and state investigations for fraud, administration officials have announced.

The move, first reported by The Hill and to be formally announced on 2 June, will mark the single largest discharge of student loan debt in the history of the US Department of Education.

In 2016, as attorney general of California, now Vice President Kamala Harris accused the company of predatory behaviour exploiting lower-income people and people in poverty. She secured a $1.1bn judgment against Corinthian, with restitution for students who were defrauded by the company, which folded after filing for bankruptcy in 2015.

The debt cancellation will apply automatically for former students from any of the defunct colleges under Corinthian, including Everest, Everest College Phoenix, Heald College and WyoTech. It is expected to impact roughly 560,000 former students.

The maneuver comes as the administration weighs broader relief and faces pressure from progressive legislators and advocates to address the student loan debt crisis, which has surged to more than $1.8 trillion held among roughly 45 million Americans.

Payments on federal student loans have been paused with interest rates set to zero per cent with passage of Covid-19 relief legislation in March 2020. That pause was repeatedly extended, with the latest extension through August 2022, providing dramatic financial relief for millions of Americans during the public health crisis and its economic fallout.

Most of that outstanding debt is in federally backed loans.

A group of former students (the “Corinthian 15”) joined a “debt strike” in 2015 to push for broader relief, ultimately growing to more than 200 people pursuing borrower defense claims, which have allowed students defrauded by for-profit schools to eliminate their debts.

Education Secretary Miguel Cardona has approved more than $2bn in borrower defense claims since entering the administration.

“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris Administration has their back and will discharge their federal student loans,” he said in a statement. “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.”

To date, the administration has approved $25bn in student loan relief for more than 1 million borrowers.

During his campaign, now-president Biden proposed canceling up to $10,000 in student loan debt. In November 2020, weeks before he entered the White House, he said student debt relief should happen “immediately” when he entered office.

National Economic Council Director Brian Deese told reporters on Tuesday that the president “hasn’t made any decision” one whether to cancel up to $10,000 in debt per borrower, among potential outcomes reportedly under consideration at the White House.

White House officials have been mulling for months whether the president or Education Department has the legal authority to unilaterally cancel debt, but publicly, the administration has largely said that the president is waiting for legislation from Congress.