Student loans: Government reminds borrowers of discharges before payment pause expires

The government is reminding hundreds of thousands of borrowers of their discharged student loans from Corinthian Colleges, ITT Technical Institute, and Marinello Schools of Beauty as the pause on debt payments expires at the end of the year.

Borrowers who received a borrower defense discharge don’t have to resume payments after the forbearance ends on December 31. Collections also won’t resume if they are in default. Borrowers who attended these schools don’t need to apply for the discharge.

The reminders — which are being emailed on Thursday — come as the government has completed 53,000, or 7%, of the 750,000 discharges so far.

“It will take the Department some time to process your discharge,” the letter to borrowers states. “Until the Department completes its work, your eligible loan(s)…will remain paused in forbearance/stopped collections, and we will not ask you to resume making payments. If your loan(s) are in default, we will not attempt to collect on the loan(s) being discharged.”

HOUSTON, TEXAS - AUGUST 29: Bio Engineering major Daniel Gutierrez studies in the Rice University Library on August 29, 2022 in Houston, Texas. U.S. President Joe Biden has announced a three-part plan that will forgive hundreds of billions of dollars in federal student loan debt. Since announced, the plan has sparked controversy as critics have begun questioning its fairness, and addressing concerns over its impact on inflation. (Photo by Brandon Bell/Getty Images)
Credit: Getty Images

Borrowers also have 30 days to opt out of the debt discharge. Borrowers who made payments will be refunded by the loan servicer. However, if borrowers have student loan debt outside of these schools, repayment or collections will resume after January 1.

Borrowers can call ED’s borrower defense hotline at (855) 279-6207 if they have questions.

Many of the debt discharge announcements from the Education Department were related to the “closed school loan discharge” and “borrower loan defense discharge” programs.

Borrower defense applications surged after the Obama administration cracked down on predatory for-profit colleges in 2015 and created new regulations, but the mechanism for defrauded borrowers seeking debt relief broke down during the Trump administration under then Education Secretary Betsy DeVos.

Advocates sued the Biden-era Education Department over the slow-moving debt relief process for students who said they had been waiting years for debt relief under the borrower defense to repayment process.

“Since Day One, the Biden-Harris Administration has been working diligently to reinvigorate a borrower defense process after the past administration failed to approve a single set of new findings over their entire tenure,” Education Under Secretary James Kvaal said in a statement.

“In contrast, we’ve approved the most borrower defense claims of any administration, signing off on full relief for more than 1 million borrowers to receive a combined $14 billion in discharges, and ramped up our oversight by reestablishing the Office of Enforcement within FSA. The Biden-Harris Administration will continue to stand up for borrowers who've been cheated by their colleges and clear the backlog created by the previous administration to ensure borrowers receive the relief they deserve.”

Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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