US Students Granted Up To $US3.5 Billion In Debt Relief

US Students Granted Up To $US3.5 Billion In Debt Relief

It’s an unprecedented move in higher education, but a welcome one. The US Secretary of Education has pledged to forgive the loans of as many as 350,000 students who were defrauded into taking on huge student loan debts by online schools owned by Corinthian Colleges. More students may also be eligible.

In the New York Times, Tamar Lewin writes:

In a move against what he called “the ethics of payday lending” in higher education, Secretary of Education Arne Duncan announced Monday that the Education Department would forgive the federal loans of tens of thousands of students who attended Corinthian Colleges, a for-profit college company that closed and filed for bankruptcy last month, amid widespread charges of fraud.

Mr. Duncan also said the department planned to develop a process to allow any student — whether from Corinthian or elsewhere — to be forgiven their loans if they had been defrauded by their colleges.

A special master would be appointed within three weeks, department officials said, to create procedures to apply for relief that are “durable, not just for Corinthian but beyond.”

If all the debts of every Corinthian student are forgiven, the final tally of debt relief would be $US3.5 billion. Of course, this assumes that every student applies for debt relief, a process which could prove difficult.

Still, it’s a step forward. Duncan’s announcement was in part a response to careful organising by students and activists — many associated with the student debt strike movement and the Debt Collective. The students in question were given fake statistics about their colleges’ job placement rates, promised help with job searches that never materialised, and wound up broke and jobless with useless degrees that had cost upwards of $US100 thousand in loans.

Many critics of Duncan’s plan have pointed out that this situation reveals how flawed the US system of student loans is, where the government is responsible for essentially acting as banker. Student debt in the US has doubled over the past decade, and continues to rise. Hopefully this debt forgiveness will do more than help students. Maybe it will help us rethink how we fund higher education.

[via NYT]