The Biden administration has agreed to settle a class action lawsuit brought by student loan borrowers for alleged mismanagement of the Borrower Defense to Repayment program — a key student loan forgiveness program. Under the terms of the settlement agreement, the Education Department will cancel nearly $6 billion in federal student loan debt for over 200,000 borrowers.
Here are the details.
Student Loan Forgiveness for Borrowers Misled By Their Schools
The settlement agreement is intended to resolve Sweet v. Devos, a years-long class action lawsuit originally brought by student loan borrowers against the Trump administration for failure to process and approve thousands of Borrower Defense to Repayment applications. The Borrower Defense program allows federal student loan borrowers to apply for loan forgiveness if they were duped into enrolling or remaining enrolled at an institution due to misrepresentations or false promises about key aspects of their educational program such as admissions, transferability of credits, or career or earnings prospects.
The lawsuit and subsequent filings by the borrowers alleged that the Education Department wrongfully denied them relief sought through Borrower Defense to Repayment by delaying or refusing to process applications (in some cases for years), and subsequently issuing blanket denials without doing a full review. The lawsuit was not resolved by the 2020 presidential election, and the Department of Education continued to litigate the matter under the Biden administration.
Under the terms of the proposed settlement agreement, 264,000 federal student loan borrowers who already submitted Borrower Defense applications will be approved for student loan forgiveness, which is expected to total around $6 billion. Dozens of schools — all for-profit institutions — are listed as qualifying borrowers for discharge under the agreement, including DeVry, the Art Institutes, and ITT Technical Institute.
“This momentous proposed settlement will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government,” said Eileen Connor, Director of the Project on Predatory Student Lending, which represented the class of student loan borrowers in the suit. “It will not only help secure billions of dollars in debt cancellation for defrauded students, but charts a borrower defense process that is fair, just, and efficient for future borrowers.” The Project called the agreement a “landmark” resolution.
“Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” said Education Secretary Miguel Cardona in a statement. “We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.” Notably, Cardona did not mention that the Department refused to admit to any wrongdoing as part of the settlement agreement.
The settlement agreement must still be approved by the judge presiding over the lawsuit.
Relief Follows Other Student Loan Forgiveness Initiatives Through Borrower Defense
The settlement agreement follows a separate Borrower Defense initiative earlier this month by the Biden administration, whereby the Education Department agreed to automatically cancel the federal student loan debt of over 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 need not even submit an application to qualify for that relief.
Other borrowers, however, would need to submit a Borrower Defense to Repayment application. The settlement announced this week only covers borrowers who already submitted Borrower Defense applications. The Department indicated in the settlement agreement that “attendance at one of these [listed] schools justifies presumptive relief [under Borrower Defense to Repayment]… based on strong indicia regarding substantial misconduct by listed schools.” This suggests that borrowers who attended these schools, but have not yet applied for relief, may stand a reasonable chance of being approved if they were subject to false promises or misrepresentations and submit an application.