The Biden administration has agreed to settle a class action lawsuit brought by student loan borrowers over alleged mismanagement of the Borrower Defense Program – a key student loan forgiveness program. Under the terms of the settlement agreement, the Department of Education will forgive nearly $6 billion in federal student loan debt for more than 200,000 borrowers.
Here are the details.
Student loan forgiveness for borrowers misled by their schools
The settlement agreement seeks to resolve Sweet vs. Devos, a year-long class action lawsuit originally brought by student borrowers against the Trump administration for failing to process and approve thousands of borrower defense requests for repayment. The Borrower Defense Program allows federal student loan borrowers to request loan forgiveness if they have been tricked into enrolling or remaining enrolled at an institution because of misrepresentations or false promises about key aspects of their curriculum such as admissions, credit transferability, or career or earnings prospects.
The Borrowers’ lawsuit and subsequent filings alleged that the Department of Education wrongly denied them requested assistance through the Borrower’s Defense for repayment by delaying or refusing to process applications (in some cases for years), and then issuing blanket denials without conducting a full review. The lawsuit was not resolved by the 2020 presidential election, and the Department of Education continued to litigate the issue under the Biden administration.
Under the terms of the proposed settlement agreement, 264,000 federal student loan borrowers who have already submitted borrower defense claims will be approved for student loan forgiveness, which is expected to total approximately $6 billion. Dozens of schools — all for-profit institutions — are listed as eligible borrowers for release under the deal, including DeVry, art institutes and the ITT technical institute.
“This momentous settlement proposal will provide answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being misled by their schools and ignored or even dismissed by their government,” said Eileen Connor, director of the Project on Predatory Student Lending, which represented the class of student borrowers in the lawsuit. “This will not only help secure billions of dollars in debt forgiveness for defrauded students, but will map out a borrower defense process that is fair, just and effective for future borrowers.” The Project called the agreement a “historic” resolution.
“From day one, the Biden-Harris administration has worked to address long-standing issues with the borrower advocacy process,” Education Secretary Miguel Cardona said in a statement. “We are pleased to have worked with the plaintiffs to reach an agreement that will provide billions of dollars in automatic relief to approximately 200,000 borrowers and which we believe will resolve the plaintiffs’ claims in a fair and equitable manner for all parties.” Notably, Cardona did not mention that the Department refused to admit any wrongdoing as part of the settlement agreement.
The settlement agreement still needs to be approved by the judge presiding over the trial.
Aid follows other student loan forgiveness initiatives through Borrower Advocacy
The settlement agreement follows a separate borrower advocacy initiative earlier this month by the Biden administration, in which the Department of Education agreed to automatically forgive federal student loan debt of over $100,000. half a million borrowers, who previously attended Corinthian Colleges, a notorious national chain of for-profit schools that closed in 2015 following widespread allegations of misconduct. The administration has indicated that borrowers do not even need to submit an application to receive this relief.
Other borrowers, however, will need to submit a Borrower’s Defense Claim for Reimbursement. The settlement announced this week only covers borrowers who have already submitted Borrower Defense Claims. The Ministry stated in the settlement agreement that “participation in any of these [listed] schools justifies presumptive relief [under Borrower Defense to Repayment]… based on solid evidence of serious misconduct by listed schools. This suggests that borrowers who have attended these schools, but have not yet applied for relief, may have a reasonable chance of being approved if they have been mispromised or misrepresented and submit a request.
Borrowers can access settlement details and a list of covered schools here. To apply for a Borrower’s Defense Until Reimbursement, you can begin the process here.
Further Reading on Student Loans
560,000 borrowers will get automatic student loan forgiveness, but others can still apply for relief
Biden Reportedly Close to Making a Decision on Widespread Student Loan Forgiveness – Here’s Where It Stands
Biden’s new student loan forgiveness changes could end up costing some borrowers
Want student loan forgiveness? To qualify, borrowers may need to do this first