Student loans: Education Department discharges $1.5 billion for 79,000 former Westwood College students

The Education Department (ED) is discharging $1.5 billion in student loans for 79,000 former defrauded students who attended for-profit Westwood College from January 1, 2002, through November 17, 2015, when it stopped enrolling new students before closing September 2016.

Even if borrowers have not applied for a borrower defense discharge, relief will be granted without any additional actions by borrowers.

This action follows a two-year investigation into Westwood’s conduct, which had previously resulted in the approval of $130 million in borrower defense discharges for approximately 4,000 borrowers, according to Tuesday’s press release from ED. It also follows President Joe Biden’s measures last week to stem the student loan crisis, including forgiving up to $20,000 in debt.

“Westwood College’s exploitation of students and abuse of federal financial aid place it in the same circle of infamy occupied by Corinthian Colleges and ITT Technical Institute,” James Kvaal, ED’s under secretary, said in a statement. “Westwood operated on a culture of false promises, lies, and manipulation in order to profit off student debt that burdened borrowers long after Westwood closed. The Biden-Harris Administration will continue ramping up oversight and accountability to protect students and taxpayers from abuse and ensure that executives who commit such harm never work at institutions that receive federal financial aid again.”

Westwood College made "substantial misrepresentations" about job placement rates to its students, according to ED’s findings, including “misleading guarantees” about getting jobs in their field of study and “assurances of unrealistic post-graduation salaries,” extensive misrepresentations that its criminal justice program would lead to jobs with the the Chicago Police Department or the Illinois State Police Department, and exaggerations about “the transferability of its credits” when the institution knew those credits “would rarely transfer.”

“We are glad that the Department of Education is finally providing long overdue relief to Westwood students,” Kyra Taylor, staff attorney at the National Consumer Law Center, said in a statement. “For years, the Department of Education has been aware of how Westwood College lied to prospective students about their graduates’ employment prospects when enrolling them. By deciding to provide automatic relief, without an application, the Department is ensuring that harmed borrowers will not be left out of relief because they did not know how to apply.”

The relief, though, took time to come through.

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 former Education Secretary Betsy DeVos under the Trump administration.

In May, the Lawyers' Committee for Civil Rights Under Law, the National Consumer Law Center, and Student Defense filed a lawsuit against the Biden-era Education Department (ED) over the slow-moving debt relief process for students who said they had been "waiting six years" for debt relief under the borrower defense to repayment process.

“It never should have taken this long — or litigation — for the Department of Education to do the right thing, but we are thrilled that the Department has finally discharged the loans of defrauded Westwood College students,” Dan Zibel, vice president and chief counsel at Student Defense, said in a statement. “This move means thousands of borrowers are finally free from the loans they took out based, in part, on Westwood’s lies and misrepresentations. While this won't make up for the lifelong damage the school has caused, it is welcome and overdue financial relief for students who shouldn’t have to continue worrying about this debt.”

The relief will especially help former Black and Hispanic students. According to advocates, from 2004 to 2016, Westwood's student population was 44% Black and 21% Latinx.

“Today’s announcement will provide much-needed relief particularly to Black and Latinx communities who were disproportionately enrolled in Westwood’s sham Criminal Justice program,” Genevieve Torres, associate director of the Educational Opportunities Project with the Lawyers’ Committee for Civil Rights Under Law, said in a statement. “They bear the substantial harms from unaffordable debt compounded by generations of discriminatory policies that strip wealth from communities of color.”

“The Department’s actions—though long overdue—are an important step towards ensuring the predatory and abusive practices of for-profit colleges do not foreclose economic opportunities for Black and Latinx students and families who deserve meaningful educational opportunities and are unfairly targeted by such programs,” Torres added.

Earlier this month, the Education Department announced it formally notified DeVry University that it is required to pay millions of dollars for approved borrower defense applications.

Additionally, the department announced the approval of discharges for 100 borrowers who enrolled in the Medical Assistant or Medical Billing & Coding Program at Kaplan Career Institute’s Kenmore Square location in Massachusetts from July 1, 2011 to February 16, 2012.

Former students at for-profit schools like Corinthian College and ITT Tech also got their loans discharged under “borrower loan defense discharge” or “closed school discharge” programs.

If you have federal student loans from a college or career school that misled you "or engaged in other misconduct in violation of certain state laws,” you can apply for loan discharge under the “Borrower Loan Defense Discharge” program.

“If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan,” according to the Federal Student Aid website. “Loan discharge is the removal of your obligation to repay your loan under certain circumstances.”

Discharge differs from loan forgiveness or cancelation, which was approved for some borrowers last week by President Biden.

Aarthi Swaminathan contributed to this article.

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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