Court Grants Preliminary Approval For $6 Billion In Student Loan Cancellation Under Landmark Settlement

A federal court on Thursday granted preliminary approval for a settlement agreement between the Biden administration and student loan borrowers to resolve a long-running class action lawsuit over stalled student loan forgiveness applications.

Here are the details.

Student Loan Forgiveness for Borrowers Defrauded By Institutions

Last month, the Education Department and a class of federal student loan borrowers reached a proposed joint settlement agreement to resolve Sweet v. DeVos, a long-running class action lawsuit. Borrowers filed the lawsuit years ago over claims that the Department, under the Trump administration, had stopped or delayed processing of Borrower Defense to Repayment applications. The Borrower Defense to Repayment program can provide federal student loan cancellation for borrowers who were defrauded by their school through false promises and misrepresentations about their educational program.

The proposed settlement agreement would provide a quarter million federal student loan borrowers who already submitted Borrower Defense applications with $6 billion in student loan forgiveness. Attendance at dozens of schools — all for-profit institutions — can automatically qualify those borrowers for relief under the proposed agreement.

“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,” said Education Secretary Miguel Cardona in a statement last month.

Judge Grants Preliminary Approval of Settlement Agreement, Paving the Way for Student Loan Cancellation

While the parties agreed to settle last month, that settlement agreement would still have to be approved by the court.

Yesterday, Judge William Alsup, who has presided over the Sweet v. DeVos case, granted preliminary approval of the proposed settlement agreement and ordered the parties to propose a schedule for final approval. Only when the settlement proposal has been granted final approval by the court can the Education Department begin to implement student loan cancellation. Attorneys for the student loan borrowers anticipate final approval sometime this fall.

“Preliminary approval is an important milestone for this settlement and for our clients, bringing us one step closer to finally delivering certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims,” said Eileen O’Connor, Legal Director for the Project on Predatory Student Lending, which has been representing the student loan borrowers in the suit.

Following the court’s preliminary approval, the Education Department will begin sending out notices to class members to provide them with the opportunity to submit comments to the court regarding the proposed settlement agreement. Borrowers will have until September 8, 2022 to submit comments.

“Details about the process will be forthcoming,” said the Project on Predatory Student Lending in a tweet on Thursday.

Borrowers Can Still Apply For Student Loan Forgiveness, But Relief Is Not Guaranteed

Under the proposed settlement agreement, only borrowers who have already submitted Borrower Defense to Repayment applications and attended one of the covered institutions would be entitled to student loan cancellation, pending final approval by the court.

However, there is still a window of time for other borrowers to potentially benefit. Under the proposed agreement, borrowers who attended one of the covered institutions, and who submit a Borrower Defense application prior to final approval of the proposed settlement, would be entitled to a determination by the Education Department within 36 months. If no decision is made within that timeframe, the borrower would be entitled to student loan cancellation. However, if the Department of Education renders a decision within that timeframe, attendance at one of the covered institutions does not guarantee relief; borrowers would still have to show that they were misled or defrauded by their school through misrepresentations or false promises about key program elements.

For more details on Sweet v. DeVos and the preliminarily-approved settlement agreement, the Project on Predatory Student Lending has established a detailed informational website. Borrowers who want to submit a Borrower Defense to Repayment application can do so via the Department of Education’s website.

Note that in some cases, schools can withhold transcripts for borrowers who are approved for relief through Borrower Defense to Repayment.

Further Student Loan Reading

Biden Administration Is Ready To Implement Mass Student Loan Forgiveness, As Decision Could Come Any Day

Did The Biden Administration Just Drop A Big Hint On Student Loan Forgiveness?

Do You Qualify For Student Loan Forgiveness? Education Department Launches New Tool To Help Borrowers Find Out

If You Went To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do