President Biden’s administration has announced that the US will cancel $6 billion in student loans for 200,000 borrowers who claimed that they were defrauded by their colleges.

Many of the borrowers have been waiting years for the Department of Education to process their claims, under a rule known as borrower defence to repayment. It allows borrowers that believe they were misled by their college, often due to overinflated job placement rates or the ability to transfer credits, to request federal student loan relief.

In 2019, seven of those borrowers filed a class-action lawsuit over the department’s handling of the claims. The processing of applications stalled under former Education Secretary Betsy DeVos - the Biden administration has been working to deal with the backlog.

The deal to cancel the remaining federal student loan debt for 200,000 was reached between the plaintiffs and the Department of as part of a proposed settlement agreement. If approved by the judge, the 200,000 borrowers will automatically get a full debt refund within one year.

An additional 64,000 borrowers have already filed borrower defence claims that may also be eligible for debt relief under the proposed settlement.

According to educationdata.org, approximately 43 million Americans have federal student loan debt. Previously, the Biden administration had approved $25 billion in student debt forgiveness for 1.3 million borrowers.

Image from NBC News