In a significant move to provide relief to borrowers who were misled and burdened with debt, President Joe Biden announced on Tuesday that the Biden administration will forgive $130 million in student loans for 7,400 former students of CollegeAmerica, a for-profit college based in Colorado. The college, which closed down in 2020, had been accused of providing false information about its successes and misleading students about their career prospects and loans.

President Biden condemned the actions of CollegeAmerica, stating that the borrowers were "lied to, ripped off, and saddled with mountains of debt." This debt relief is part of the administration's ongoing efforts to address the issue of for-profit colleges taking advantage of students. So far, the Department of Education has forgiven $14.7 billion in debt for nearly 1.1 million borrowers who attended for-profit colleges such as Corinthian Colleges and ITT Technical Institute.

The debt relief will be automatic for former CollegeAmerica students who attended between 2006 and July 1, 2020. This includes borrowers who participated in programs like the Public Service Loan Forgiveness program and income-driven repayment loan plans. The Department of Education stated that borrowers will have their federal loans canceled regardless of whether they have filed a borrower defense to repayment application, which is a form used to report schools for misleading their enrollees.

The investigation into CollegeAmerica revealed numerous instances of false advertising and misrepresentation. The college advertised high salaries and job placement rates that were far from the reality. According to the Department of Education, graduates of CollegeAmerica earned an average of only $25,000 five years after graduation, which is less than the salaries of high school graduates. The college also falsely claimed a job placement rate of 70%, while the actual rate was around 40%. The Department of Education cited examples where graduates working as a produce clerk and a waiter were counted as successful job placements.

Colorado Attorney General Phil Weiser, who played a crucial role in the investigation, stated that CollegeAmerica knowingly took advantage of students by promising high-earning potential and job placement that they knew were not attainable. He emphasized that protecting borrowers from predatory lending and helping them navigate through student loan burdens will continue to be a priority for his office.

The Center for Excellence in Higher Education, which operated CollegeAmerica, has not yet provided a comment on the matter. Last year, the organization filed a lawsuit against the Department of Education, claiming that the federal government unfairly targeted their schools and withheld funds. The Department of Education is seeking to dismiss the suit.

President Biden expressed his commitment to providing relief to borrowers and holding bad actors accountable. He criticized his predecessor, former President Donald Trump, for ignoring colleges that defrauded students and borrowers. Biden pledged to continue fighting for borrowers and delivering the promise of college to more Americans.

The federal loan forgiveness for CollegeAmerica borrowers is separate from President Biden's $400 billion plan to forgive student loans for millions of Americans. The Supreme Court effectively halted this plan with a ruling in June. The relief announced on Tuesday only applies to federal loans and does not involve broader loan forgiveness.

Former students of CollegeAmerica will begin to be notified in August if they are approved for loan cancellation. Any remaining loan balances will be zeroed out, and credit trade lines will be deleted. Additionally, any payments made to the Department of Education will be refunded.

The debt relief for CollegeAmerica borrowers marks a significant step in addressing the issue of for-profit colleges misleading and burdening students. It is part of the Biden administration's broader efforts to reform the student loan system and provide relief to borrowers who have been taken advantage of by predatory institutions.