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Nearly $4 Billion in Student Debt Canceled

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U.S. Secretary of Education Miguel A. Cardona | Image by Anna Moneymaker/The New York Times

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Over 200,000 borrowers will have roughly $3.9 billion worth of federal student loans canceled, according to the U.S. Department of Education.

The move targets students who borrowed federal taxpayer-funded loans and attended ITT Technical Institute anytime between January 1, 2005, and its closure in September 2016.

U.S. Secretary of Education Miguel Cardona explained, “It is time for student borrowers to stop shouldering the burden from ITT’s years of lies and false promises.”

He continued, “The evidence shows that for years, ITT’s leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause.”

ITT Tech was a for-profit college system with around 130 locations across nearly 40 states. Founded in 1969, ITT Tech grew to become of the largest for-profit college systems in the United States.

In 2004, ITT Tech locations in 10 different states were raided by federal law enforcement officials during an investigation into alleged predatory recruitment practices that ultimately defrauded students. The investigation was dropped, however, and the school continued to operate for another 12 years.

In 2016, the school shuttered all its chain locations and filed for bankruptcy after the federal government refused to allow students of the school to receive federal-taxpayer-sponsored student loans.

In response, ITT Tech denied allegations of fraud and denounced the federal government.

A press release stated, “The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes. … These unwarranted actions, taken without proving a single allegation, are a ‘lawless execution.'”

Still, before having federal coffers shut in its face, ITT Tech had been a major recipient of federal-taxpayer-funded student loans, receiving tens of billions over the years. In 2010 alone, ITT Tech received $32 billion, roughly 25% of all federal aid given that year.

This is not the first time the Education Department has canceled the loans of former ITT Tech students. In 2019, the federal agency joined with the Consumer Financial Protection Bureau and a coalition of states to reach an agreement that canceled $168 million of student debt. In August 2021, 115,000 people had $1.1 billion canceled.

Similarly, in June 2022, students who attended the for-profit Corinthian Colleges anytime during its existence were automatically granted nearly $6 billion in debt cancellation on similar allegations of institutional fraud.

While ITT Tech and Corinthian College student loans were canceled because of fraudulent activities by the institutions, some activists are advocating for universal debt “forgiveness.”

While debt cancellation relieves some borrowers, opponents of broad student loan cancellation argue that taxpayers are left footing the bill, and broad cancellation would have wide-reaching adverse effects on the economy.

Former chief economist at the U.S. Department of Labor and George Washington University economics professor Diana Furchtgott-Roth said, “Forgiving student loans is unfair to students who have paid off their loans … unfair to taxpayers whose dollars are paying off the loans and who have no college education.”

David McClough, an economics professor at the James F. Dicke College of Business Administration, concurred, “Debt forgiveness is not fair, but more importantly, it is bad policy. It distorts incentives and encourages behavior that contributed to the ‘problem’ that it seeks to address. The policy is pure political opportunism that is destined worsen the situation.”

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