By AJ Fabino
The Biden administration on Wednesday said that it has forgiven $37 million in student debt for borrowers defrauded by the University of Phoenix, following a multi-year investigation by the Federal Trade Commission (FTC) that led to a $191 million settlement in 2019.
Internal emails, advertisement materials, and recorded phone calls acquired by the FTC showed the university falsely claimed corporate relationships.
Notifications of relief for impacted borrowers are set for early October.
“It makes me mad when people are like, ‘I’m a taxpayer. I don’t see why I have to pay for your mistakes,’” said Lisa Frisby, 52. “I’m telling you, I’ve been paying on that student loan.”
To date, over $117 billion in student debt has been canceled by the Biden administration benefiting 3.4 million borrowers through adjustments to repayment plans and the Public Service Loan Forgiveness program, according to a Wednesday CNBC report.
President Joe Biden‘s broader debt forgiveness plan, aimed to erase up to $20,000 in student debt for Americans earning less than $125,000 annually, was blocked by the Supreme Court in June.
That forgiveness plan, intended to impact millions, remains in legal and regulatory processes. It targets specific borrower groups, with the administration using the Higher Education Act to potentially bypass legal barriers.
Biden clapped back, citing the Higher Education Act of 1965, which empowers the Secretary of Education, currently Miguel Cardona, to “compromise, waive, or release loans under certain circumstances.”
However, the plan still faces delays and might not be operational before the 2024 election, CNBC said, with continuous legal challenges likely to hinder its implementation.
The current situation escalates uncertainty for roughly 40 million Americans holding federal student loans, preparing to recommence their loan repayments after over three years, following the suspension enacted in March 2020 due to Covid-19.
The uncertainty affects long-term financial planning, forcing borrowers to rely on existing programs that can potentially reduce their monthly repayments.
They may also be looking to refinance their student loans, evidenced by the uptick in Google trend data for “student loan refinance.” Benzinga’s Premarket Prep host Mitch Hoch on Friday noted that Google searches for student loan refinance are at one-year highs, a boon for student loan refinancing providers like SoFi Technologies Inc (NASDAQ:SOFI).
“They’re promising that you’re going to have it retired in 20 or 25 years,” said Christopher Gaunya, who, at 61, thought he would never be able to buy a home or save enough to retire comfortably.
With the resume of student loan repayments and the surge in Google trend data, there’s speculative trade value in SoFi.
On student loan forgiveness, Biden’s attempt to actualize the plan engages an intricate rule-making process under the Higher Education Act, claiming that the 1965 law permits extensive “compromise and settlement” authority to the secretary of education to nullify debt.
The process necessitates prolonged periods of hearings, public commentary, and multi-faceted input before any solidification of the rules, with the Education Department aiming for completion by next year, according to a Friday report issued by The Wall Street Journal.
Produced in association with Benzinga