By Pradeep Saran, September 21,2023
The Biden administration has announced the cancellation of nearly $37 million in federal student loan debt for over 1,200 borrowers who attended the University of Phoenix. This decision comes after the administration found that the for-profit school had misled students regarding job prospects.
While the administration had initially planned broader student loan forgiveness programs, some borrower debts have been canceled under existing programs after the Supreme Court blocked the more extensive forgiveness program that aimed to forgive up to $20,000 for low- and middle-income borrowers.
In a similar move, the Department of Education canceled $72 million in federal student loan debt in August for more than 2,300 borrowers who attended the for-profit Ashford University in California.
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.In total, the administration has now canceled over $117 billion of the nearly $1.7 trillion of outstanding federal student loan debt since 2021.
The borrowers eligible for debt relief from the University of Phoenix attended the school between September 21, 2012, and December 31, 2014, and had applied for loan forgiveness under the borrower defense to repayment program, which allows individuals to seek debt relief if they believe their college misled or defrauded them.
An investigation by the Federal Trade Commission (FTC) played a significant role in this decision. The Department of Education found that the University of Phoenix had falsely represented its partnerships with thousands of corporations, including Fortune 500 companies, to give students hiring preferences. In 2019, the FTC reached a settlement agreement with the University of Phoenix over similar claims, though the school did not admit to or deny any allegations at that time.
The University of Phoenix has disagreed with the government’s findings and reiterated that it did not admit wrongdoing when settling with the FTC in 2019. The school intends to challenge the allegations through legal means.
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The Department of Education plans to notify eligible borrowers by early October that their debt relief applications have been approved. These borrowers’ loans will be placed in forbearance until the debt is officially canceled, meaning they won’t be required to make payments, even after the pandemic-related freeze on federal student loan payments ends in October.
Other former University of Phoenix students who believe they were similarly affected during those years can still apply for student debt relief under the borrower defense program on the Federal Student Aid website.
Additionally, the Biden administration has made it easier for borrowers to apply for federal student loan forgiveness through various existing programs. It expanded eligibility for the Public Service Loan Forgiveness program, which forgives outstanding debt for public sector workers after ten years of qualifying payments, and is implementing a one-time account adjustment that will cancel debt for borrowers who have been paying for at least 20 years. In August, a new income-driven repayment plan called SAVE (Saving on a Valuable Education) was launched to reduce monthly payments and the overall amount paid back over time for eligible student loan borrowers.
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