America is forgiving $40 million in student debt taken on by thousands of students

The Department of Education said Wednesday that it's already forgiven $40 million in debt issued to more than 3,000 former students of now-defunct, for-profit Corinthian College Inc.

The development comes after the Education Department said in June that it would provide automatic debt relief to people who attended a now-shuttered Corinthian College after June 2014.

The Education Department also said it would accept claims under a so-called defense to repayment on an individual basis. Under the law, a borrower defense to repayment provides loan forgiveness to students if their school committed fraud or broke the law in some way.

Under Secretary Ted Mitchell and Special Master Joseph Smith held a press call on Wednesday to announce the discharges.

They also announced they have placed more than 7,000 students into forbearance or stopped loan collection status for those with pending borrower defense to repayment.

When pressed about the potential total dollar figure that could be provided in loan relief, Mitchel stressed that any precise dollar figure would be "highly, highly speculative" but that it could be as much as $3.2 billion.

The specific details released from the Department of Education (ED) are as follows:

• Closed school claims received: 7,815
• Closed school claims approved: 3,128
• Borrower Defense claims received: 4,140
• Borrower Defense claims approved: 0 (still under review)

While the ED is making progress towards its promise to aid students who were defrauded by for-profit colleges, many outstanding questions must be addressed quickly in order to protect students.

One issue addressed on the press conference was that students who have been placed into forbearance by the ED will still accrue interest on their loans making their debt balances will grow, while the ED reviews their claim.

Mitchell acknowledged that this was an issue that the ED wanted to work to rectify. "We're identifying a number of issues, a number problems, with the law and regulation that we hope to square away so that we can better protect students," he said. "This is something we hope to take up with Congress."

The discussion only touched on federal loan relief for loans dating back to 2010, the time when the government started issuing Direct Loans. Currently, Federal Family Education Loan (FFEL) holders are exempt from relief, meaning anyone who took out a federal loan prior to 2010 will not have their loans discharged.

A representative from the Department of Education acknowledged that FFEL loans are currently not covered and said, "We are initiating a rule making committee to seek input from all stakeholders-including students and the higher education community-on a range of issues, including the proper treatment of FFEL loans, to help us develop regulations on this subject."

Perhaps the ED will have come to a decision by their next progress report which will be no later than October 15, according to Smith.