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U.S. Secretary of Education Miguel Cardona speaks during a press conference at the White House on Wednesday. Andrew Harnik / AP Hide caption

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Andrew Harnik / AP

U.S. Secretary of Education Miguel Cardona speaks during a press conference at the White House on Wednesday.

Andrew Harnik / AP

The U.S. Department of Education announced Thursday that it was abolishing a controversial formula advocated by former Secretary of Education Betsy DeVos that provided only partial student loan relief to borrowers defrauded by private, for-profit colleges. Instead, what is known as a “streamlined approach” is used to provide full relief to borrowers.

On a call to reporters, a senior official said the department had reviewed the DeVos-era formula and found that it was not providing adequate relief to borrowers as they had clearly been defrauded. The senior official said the formula relies on math, which makes it “very difficult, if not impossible” for some borrowers to qualify for full relief.

The department estimates the change would ultimately help approximately 72,000 borrowers whose claims have been approved but who received less than full relief under the previous formula – and who will receive a combined $ 1 billion notice.

The change revolves around a provision in federal law commonly known as Borrower Defense that allows borrowers who believe they have been defrauded by a college or university to apply for the cancellation of their debts. During the Obama administration, the Education Department approved thousands of applications from former Corinthian Colleges and ITT Technical Institute students.

A departmental minutes from the final days of Obama’s presidency begins: “Corinthian Colleges, Inc. (‘Corinthian’) consistently stated that all graduates received a job upon graduation or that their students were guaranteed employment upon graduation. This information were false and misleading. Accordingly, the Borrower Defense Department recommends complete relief to Corinthian Borrower Defense (BD) applicants. “

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Another memo dated January 10, 2017 came to the same conclusion for California students who claimed to have been lied to by the ITT Technical Institute and also recommended full relief.

However, DeVos criticized the department’s old approach to borrower defense for being too generous and revealed the partial discharge formula in December 2019. The formula compared the earnings of borrower defense applicants to the earnings of graduates of similar school programs. If the revenues were similar, DeVos’s division argued, borrowers would not ultimately be harmed by a school deception. That approach, DeVos said at the time, “treats students fairly and ensures that taxpayers who haven’t gone to college or have faithfully paid back their student loans don’t pay the cost of student loans for those who have not suffered damage.”

In a statement, DeVos’s successor in the department, Miguel Cardona, made it clear that he sees things differently: “A close review of these claims and related evidence revealed that these borrowers have been harmed and we are going to start them over grant their indebtedness. “”

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The department has also pledged to restore borrowers’ eligibility for government student grants and to apply to credit bureaus on behalf of borrowers to remove the associated negative credit report.

Thursday’s announcement is likely just the first step by many the department will take to reverse the previous government’s changes to defend borrowers. These guidelines are also challenged in court.

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