Likely in response to the growing debt strike, whereby former students of the now-collapsed Corinthian Colleges chain have been refusing to repay their federal student loans because of massive fraud and misrepresentation, the U.S. Dept. of Education has announced a plan that could result in more of these students being eligible for student loan forgiveness. The plan’s outline includes the following main elements:

• Limited expansion of closed-school discharge eligibility for certain Corinthian College borrowers (the “traditional” closed-school discharge option hasn’t been particularly helpful for many victims of Corinthian Colleges because of the discharge program’s limited eligibility criteria and restrictive dates).
• Creation of a clearer avenue for Corinthian Colleges borrowers to assert “Defense to Repayment,” a clause in federal student loan contracts that may allow some borrowers to avoid repaying their federal student loans if their school engaged in documented practices that violated state law.
• Allowance of borrowers asserting “Defense to Repayment” to put their federal student loans into a special forbearance, or have collections actions temporarily halted, while their applications are reviewed (meaning no payments are due during the review process).
• Establishment of a “Special Master” (what a term!) to review Defense to Repayment applications in general – and not just for graduates of Corinthian Colleges. The U.S. Dept. of Education also says it will create some sort of application process, which right now is one of the biggest barriers to asserting Defense to Repayment, as there is no formal mechanism, process, or procedure for requesting relief.

The good news: The government seems to finally be taking these borrowers seriously. It helps that these students have broad support from key policymakers and advocates, including organizations like the National Consumer Law Center and multiple state attorneys general.

The bad news: This is just the announcement of some steps that the U.S. Dept. of Education will be taking in the coming months to address this. Nothing has been concretely established yet. Furthermore, while creating paths to relief is critical to helping these student loan borrowers, the Dept. of Education’s plan creates even more bureaucratic layers to request and obtain relief – in other words, more applications, a new departmental review process, etc. What is clear to me is that if student loan debt relief is available via these new systems, it will not be automatic, immediate, easy to obtain, or widespread.

Still, small steps are better than no steps at all, in my opinion. Let’s see how this turns out.