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Published On: Fri, Jul 28th, 2017

Student Loan Forgiveness Program at a Standstill under Trump Administration

A letter from Illinois Senator Richard J. Durbin reveals that not a single application for student loan forgiveness under the borrower defense statute has been approved since Donald Trump has taken office.

With the program at a standstill, there are more than 65,000 students waiting in limbo. The majority of borrowers submitted applications under the Obama administration, but the Education Department has received more than 15,000 applications this year.

photo 401(K) 2012 via Flickr

Under law, students may apply to have their loans discharged if the school used deceptive or illegal tactics to persuade them to borrow money to attend.

The Education Department currently has 45,092 pending applications from former Corinthian colleges and an additional 7,186 pending claims from former students of ITT Tech. The remainder of the claims were submitted by students of other for-profit schools, like the University of Phoenix and DeVry University.

Borrowers with pending claims have accrued more than $140 million in interest on their loans during the waiting period.

“This response shows that while the Department of Education has illegally delayed the new borrower defense rule, it has also stopped processing federal student loan relief under current regulations for tens of thousands of defrauded borrowers,” said Durbin. “The department can’t ignore these borrowers any longer.”

Senator Durbin and four other senators sent the Education Department a series of questions on May 17 amid concerns that the pathway to student debt forgiveness had stalled under the Trump administration.

In the letter responding to the questions, Acting Under Secretary James Manning wrote that no applications had been approved “between Jan. 20, 2017, and today.”

The number of applications is likely to increase as more students become aware of the program.

Education Secretary Betsy DeVos said in June that “promises made to students under the current rule will be promises kept” and that her office was working to discharge 16,000 loans that had already been approved to be erased under the Obama administration.

In the same announcement, DeVos revealed plans to re-write the borrower defense to repayment rule.

The students kept in limbo have the option of keeping their loans in forbearance, a grace period that may extend while waiting for the application to be approved. The forbearance period, according to the department, has expired for fewer than 50 applicants, but another 31,000 are at risk in the next six months if no extension is granted.

If these loans go into repayment and borrowers cannot afford the payments, they may become delinquent and have their wages garnished. There is currently no federal student loan refinancing available to borrowers.

“With the large backlog of claims we inherited from the Obama administration, we are working diligently to set up a process to start approving claims again,” said Liz Hill, a spokeswoman for the department.

Author: Jacob Maslow

 

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