The Obama administration has received nearly 20,000 applications from Americans seeking to have their student loan debt cancelled on the grounds they were deceived by the universities they attended. The increase has led to the government forgiving tens of millions of dollars for borrowers.
Under a decade-old law, known as the “borrower defense,” borrowers are entitled to have their loans forgiven if they can prove their school used deceptive advertising and recruiting practices. This law had sat dormant for years. However, last year the Education Department, at the urging of student activists, started using the law to cancel loans taken out by former students of Corinthian Colleges. The for-profit chain was liquidated in bankruptcy last year after federal regulators accused it of running advertisements that cited false statistics on the employment status and earnings of graduates.
As of January, the agency had received about 7,500 applications for forgiveness from borrowers owing a combined $164 million. The agency continues to review applications on a case-by-case basis. It has agreed to cancel more than $27 million in debt for 3,421 borrowers, many of them former Corinthian students.
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