EXCLUSIVE — A change in federal regulations for student loan forgiveness under the Obama and Biden administrations resulted in billions of dollars being wiped clean from borrowers’ records, according to a review by the Government Accountability Office.
The Department of Education has forgiven a cumulative total of $17.2 billion in federal student loans as of April 30, 2024, according to the report. A majority of those loans were discharged during the Obama and Biden administrations due to a change in federal regulations stemming from an uptick in applications beginning in 2015.
“When all you’ve got is a hammer, everything looks like a nail,” Rep. Virginia Foxx (R-NC), chairwoman of the House Committee on Education and the Workforce, told the Washington Examiner. For years, Democrat administrations have used illegal interpretations of the borrower defense law and other student loan schemes as tools to give the far left what it wants. Now, we’ve got the numbers to confirm it.”
Foxx decried the report’s findings, accusing the two Democratic presidents of engaging in “dramatic government overreach” and “complete disrespect” toward taxpayers.
Republicans have often criticized efforts to forgive student loans, arguing that they increase taxpayer costs and are unfair to those who have already paid off their student loans and would not benefit from those programs. Others have argued that canceling loan debt would exacerbate the nation’s debt and deficit.
Since its inception, the Education Department has received 888,430 applications from 762,180 borrowers, according to the report. Of those, only 1% were denied while 47% were approved through individual adjudication. Another 23% were closed and nearly 50% remain pending as of April 30.
Borrowers may qualify for federal loan relief under the Student Loan Reform Act if their colleges engage in certain types of misconduct, such as misrepresenting information about employment prospects for graduates. The law was enacted in 1993, and borrower defense regulations were first implemented in 1995, and they remained in effect for 20 years.
Those regulations required borrowers to prove “any act or omission of the school attended by the student that would give rise to a cause of action under applicable [s]tate law.” During the first 20 years of the program, only 59 people applied to have their student loans forgiven, according to the report.
However, the Education Department saw a surge of applicants in 2015 after the closure of Corinthian Colleges, the largest for-profit college shutdown in U.S. history that kicked about 16,000 students out of school.
That prompted the Obama administration to implement new regulations as a way to “to clarify and streamline the borrower defense process,” according to the GAO report. The department then stopped processing loan applications “at various times” in 2017 under the Trump administration to conduct reviews of the process or due to litigation.
New federal regulations were established in 2019 that required the borrower to show financial harm, noting that “the act of taking out a Direct Loan does not qualify,” according to the report.
Litigation over the loan forgiveness process continued throughout 2022, eventually leading to the Education Department issuing final regulations in November 2022 that established a new federal standard that would apply to all federal applications pending on or submitted after July 1, 2023.
Those regulations were scheduled to take effect on July 1, 2023, but remain unimplemented due to ongoing litigation.
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The GAO report did not include any recommendations for the Education Department, although the agency did share its findings with the department. However, the department responded to the “comparatively low” number of denied claims, noting the department has “built a thorough, fair, and consistent process to review claims.”
“The number of approvals in GAO’s draft report reflects work done starting in 2015 (almost a decade ago), while the number of denials almost entirely reflects decisions based upon reviews done after the Department established its current processes,” Dennis Johnson, director of strategy and performance for federal student aid, wrote in a letter to GAO that was included in the report. “We will continue to review claims and approve those that are meritorious and deny those that are not.”