Biden forgives student loan debt for 200,000 borrowers – Forbes Advisor – Forbes | Vette Leader

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If you were scammed by a college and have been paying for it ever since – hoping for student loan forgiveness – you might feel like you just won the lottery. On June 23, the Biden administration announced it would forgive about $6 billion in student loan debt for about 200,000 alumni.

These students attended one of more than 150 schools participating in a class action settlement, Sweet v. Cardona. The students claimed that in exchange for their exorbitant payments, they received an inferior and shoddy education. In short, they felt cheated – enough to sue the Department of Education.

Some of the bigger names on the list of 150 nonprofit schools include DeVry University, Grand Canyon University, and the University of Phoenix. Some of the lesser-known schools on the list are the Robert Fiance Institute of Florida and the Court Reporting Institute of St. Louis.

This all came amid rumors that the White House could forgive $10,000 in federal student debt for borrowers earning less than $150,000 a year. It’s all talk so far, but the White House has indicated a decision is coming soon.

Currently, some 43 million Americans are paying off $1.75 trillion in student debt while coping with the high cost of groceries and gasoline and other inflationary expenses. So for some borrowers, the $10,000 student debt decision can’t come soon enough.

Why this student loan debt is being forgiven

This $6 billion student loan forgiveness is part of a solution to a problem that has long simmered — predatory, for-profit schools leaving their students in worse positions than if they had not attended and borrowed.

In 2010, the US Government Accountability Office (GAO) sent undercover individuals to 15 for-profit colleges and found that all 15 colleges made misleading or otherwise questionable statements to applicants. Four colleges actually encouraged applicants to engage in fraudulent practices such as B. Lying on federal aid forms.

In 2019, 264,000 borrowers banded together and sued the Department of Education hoping to benefit from a federal program called Borrower Defense for Repayment. While the Sweet-Cardona settlement ensures that 200,000 borrowers will be able to default on their loans and get back the money they paid, another 64,000 applicants are still under review.

The Borrower Defense Repayment Program allows students to get their money back only if there is clear evidence that they really have been deceived. So if you thought you had lousy teachers or just didn’t get the education you were hoping for, it’s unlikely to be enough to pay off your federal student loan debt.

That settlement was just one of several student loan forgiveness cases that made headlines this year. Earlier this month, the Biden administration cut nearly $6 billion in loans to 580,000 borrowers attending Corinthian colleges, which closed in 2015. Among other things, the for-profit educational institution has been accused of fraudulently marketing students and lying to the government about its graduation rates.

In this case, borrowers were not exposed to a crippling tax bill. When debt is forgiven, you often still have to pay taxes on it as it is treated as ‘income’. But the IRS hasn’t recognized borrowers’ forgiven debts as income, and it seems likely they won’t do so in this case either.

How to apply for student loan forgiveness if you’ve been scammed

If you’re not one of the 264,000 involved in this class action lawsuit and you’re buried under student loans, you might be wondering where you fit into all of this.

If you have attended school and feel that you have been scammed or scammed out of your money, you can seek forgiveness through the Department of Education’s Borrower Defense Program. The application process only takes about 30 minutes, according to the website, but you’ll be waiting longer for a response — it can take months, if not years, in some cases. You can also call the Department of Education’s Borrower Defense Hotline at 855-279-6207 Monday through Friday, 8 a.m. to 8 p.m. ET.

Student loan debt is still a big problem for borrowers

Meanwhile, the decision to forgive $6 billion in student debt does nothing to solve the problem of student debt in general. As the US Department of Education has suspended student loan repayments until August 31, 2022, worried borrowers are looking ahead to what will happen when their payments resume.

“[The] The announcement is great news for thousands of borrowers in need of assistance and a step in the right direction, but it doesn’t change the college affordability calculations facing today’s students,” said Josh Lachen, CEO by Moneythink, an educational technology nonprofit with offices in San Francisco and Chicago.

“Students still have to make incredibly difficult decisions about how to pay for college. Most low-income students will still need credit to get to and through school, and information about college costs and financial aid is still complex, contradictory, and downright confusing,” adds Lachen.

How to manage student loan debt now

Prior to this latest deal, the Biden administration had forgiven $25 billion in student loans. If your debt wasn’t among them, but you’re feeling stuck with what you still owe, you may have options.

“For recent graduates currently buried in college debt, each borrower’s situation is unique, but there are steps you can take to ease the strain,” says Lachen. “If you have federal loans and you are a teacher or work in a government or non-profit occupation, the first step would be to investigate the possibility of loan forgiveness. If your loans are privately owned, you should contact a student loan assistance organization to create a thoughtful plan for paying off your loans.”

In the meantime, you can always wait and hope for a $10,000 relief from the Biden administration.

Read more: Best Lenders for Student Loan Refinance

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