US Department of Education to cancel $6bn in student loan debt in proposed settlement
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The US Department of Education has announced it will cancel around $6bn in student loan debt for borrowers who accused the agency of ignoring their claims for loan cancellations. The move will benefit 200,000 individuals and is part of a proposed settlement that was filed in a San Francisco federal court. The settlement is related to a 2019 class-action lawsuit named Sweet v. Cardona, which included more than 150 colleges accused of fraudulently inducing students to enroll. Among the institutions named in the suit are DeVry University, the University of Phoenix, Grand Canyon University, and ITT Technical Institute, among others.
The deal is set to reverse 128,000 rejections sent to relief applicants, a move that a federal judge had earlier described as “disturbingly Kafkaesque”. The Education Department had earlier sent rejections to those who had applied for relief. The settlement will see the Department of Education immediately approve thousands of applications filed by people who claimed they were defrauded by the colleges, according to The Washington Post.
The settlement agreement is yet to be approved by a federal judge. Those who applied for relief will have their loans erased if they attended one of the more than 150 schools named in Sweet v. Cardona. The announcement marks a significant shift in the Biden administration’s approach to the “borrower defense to repayment” process, which is designed to provide federal loan forgiveness to students whose colleges lied to get them to enroll.
Education Secretary Miguel Cardona said the Biden administration had worked to address issues surrounding the borrower defense program. The administration had earlier approved $25bn in loan forgiveness for 1.3 million borrowers. According to CNN, around 43 million Americans have incurred federal student loan debt.
Earlier this month, the Biden administration revived the borrower defense program, which had been frozen by Betsy DeVos, the education secretary under President Donald Trump. It used the program to erase nearly $5.8bn in loan debt for 580,000 borrowers who attended Corinthian Colleges, a chain that shut down in 2015 following extensive allegations of illegal recruiting tactics, according to The New York Times.
The settlement will provide automatic relief, including refunds and credit repair, according to the Project on Predatory Student Lending, a legal organization that represents former college students. Eileen Connor, the director of the group, said in a statement that the proposed settlement would deliver answers and certainty to borrowers who had fought long and hard for a fair resolution of their borrower defense claims. Connor added that it would help secure billions of dollars in debt cancellation for defrauded students, while also charting a borrower defense process that is fair, just, and efficient for future borrowers.
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Sweet v. Cardona Settlement. studentaid.gov. Accessed March 23, 2023. https://studentaid.gov/announcements-events/sweet-settlement
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Lobosco K. Student loan forgiveness was “dangled in front of us:” How 700,000 borrowers were cut out of Biden’s plan | CNN Politics. CNN. Published October 21, 2022. Accessed March 23, 2023. https://edition.cnn.com/2022/10/21/politics/biden-student-loan-forgiveness-ffel-borrowers/index.html
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Cowley S. Government to Cancel $6 Billion in Student Loans for Defrauded Borrowers. The New York Times. https://www.nytimes.com/2022/06/23/business/student-loan-debt-fraud-settlement.html. Published June 23, 2022. Accessed March 23, 2023.