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Government cancels $500 million in student loans for 18,000 borrowers: What that means for you

"Our action today will give thousands of borrowers a fresh start."

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ITT Educational Services, one of the largest operators of for-profit technical schools, ended operations at all of its ITT Technical Institutes in 2016, citing government action to curtail the company's access to millions of dollars in federal loans and grants, a critical source of revenue. (Photo by Jahi Chikwendiu/The Washington Post via Getty Images)
The Washington Post | The Washington Post | Getty Images

The Biden administration is providing relief for students indebted to ITT Technical Institute, the now-defunct chain of for-profit technical colleges. The Department of Education said Wednesday that it would cancel $500 million in federal student loans held by 18,000 borrowers.

ITT closed in 2016 after a series of sanctions by the Obama administration. The DoE previously found that the university had made "repeated and significant misrepresentations" about its ability to help students get jobs and students' ability to easily transfer ITT credits to other colleges.

In 2018, ITT's former chief executive, Kevin Modany, and former chief financial officer, Daniel Fitzpatrick, settled fraud cases with the Securities and Exchange Commission for allegedly exaggerating claims about graduates' success in finding jobs. The pair agreed to pay penalties of $200,000 and $100,000, respectively.

"Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them," Education Secretary Miguel Cardona said in a statement.

VIDEO4:3004:30
Should you get a debt consolidation loan?

Video by Courtney Stith

Student-loan borrowers in the United States owe a collective $1.7 trillion, according to recent data published by the Federal Reserve. Americans between ages 25 and 34 owe an average balance of $33,817; for 35-to-49-year-old borrowers, that number jumps to $42,373.

While the conversation about wider federal student loan forgiveness is ongoing, you don't need to wait on new legislation to take charge of your debt. If you're having trouble meeting your obligations or think you may when payments resume on October 1, it could be wise to apply for an income-based repayment plan. These plans' added interest means it will take longer to pay off the full amount, but lower monthly payments can provide a reprieve.

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