The Biden administration’s recent Corinthian Colleges loan discharge announcement — which wiped away $5.8 billion in debt for half a million students who were scammed by the defunct for-profit giant — is exactly the type of student loan cancellation the government is supposed to undertake. It is well-targeted, fiscally responsible and legally sound.
That stands in stark contrast to another announcement some expect the administration to make this summer — sweeping debt cancellation that would be overly broad, fiscally reckless, legally dubious and hard if not impossible to implement. The White House is reportedly seeking measures that would not require congressional approval to forgive $10,000 in student debt per borrower.
The landmark Corinthian loan forgiveness came through the borrower defense to repayment rule, a policy that allows for the clearing of federal debt for students cheated by predatory colleges. Over two decades in operation, Corinthian preyed on vulnerable Americans, lying about future job prospects to get them in the door with as many federally backed student loan dollars as possible, only to slam it behind them when the last of its 100 campuses was shuttered in 2015 amid scandals, lawsuits and fines.
Those at the helm of Corinthian weren’t the only scam artists playing roulette with students’ futures and taxpayer funds to apparently pad the pockets of executives and shareholders, just among the largest and most egregious.
Clearing the remaining Corinthian debt was the right thing to do. And the relief will be provided automatically, ensuring that borrowers won’t have to jump through hoops to see their balances zeroed out. To date, all the administration’s record-setting $25 billion in loan cancellation has come through policies like borrower defense, closed school discharges and the Public Service Loan Forgiveness program.
The common thread across these efforts is the Department of Education’s use of existing authority to provide legally sound debt forgiveness. Unlike universal or income-tested cancellation, which would pose new and significant implementation barriers, these are forms of relief that the Department of Education knows how to realize and can work to improve for borrowers.
It’s reckless to talk about broad cancellation without acknowledging what it would mean for President Biden’s executive action, if he does so, to be challenged in court. But that hasn’t stopped heavy pressure from mounting from some policymakers and advocates for the administration to do just that — blanket debt forgiveness.
Not just for Corinthian, but for Cornell; not just for those ripped off, but for those reaping the benefits of quality degrees. And because this relief wouldn’t fall under established policy like borrower defense, the administration would be forced on the defensive for having tried to ram a $300 billion square peg into a legally questionable round hole.
As of the start of this year, a backlog of 110,000 borrower defense claims were still pending review by the Department of Education. There are plenty of opportunities for the Biden administration to get it right on student debt — and one big one to get it wrong.
Michelle Dimino is a senior education policy adviser at Third Way.