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Defrauded by a for-profit college? A new court ruling may help you cancel out your loan debt

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At least one class of borrowers carrying the ever-growing burden of student debt could possibly find some relief coming by way of a court ruling made earlier this week.

The ruling was tied to the fates of institutions like the for-profit ITT Tech, which went bankrupt in 2016 amid allegations of deceptive practices, leaving tens of thousands of students stranded with federal loans. They could get those discharged, but they first needed to know the option was available and then how to apply for it, said attorney Julie Murray.

Murray and students she represents won a federal ruling on Tuesday, with the judge ordering the Department of Education to immediately implement an Obama-era rule called borrower defense that makes debt forgiveness automatic.

“On paper, students who were at places like ITT Tech when it closed and never went anywhere else should be getting their loans discharged immediately,” said Ed Miller, a former Department of Education staffer under President Barack Obama.

The rule makes it easier for students defrauded by for-profit colleges to discharge their student loans, ban arbitration and allow for class-action lawsuits. Student loan debt has soared over the past decade. It’s now behind only mortgages as a share of consumer debt. 

For-profit schools have continued to challenge the borrower defense rule, calling it overly burdensome. The Trump administration is moving to replace the rule as early as summer 2020.

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