$6 billion student loan settlement finalized

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About 200,000 student borrowers who say they were defrauded by their colleges will soon have their debts automatically forgiven after a federal judge granted final approval of a $6 billion settlement on Wednesday.

The agreement resolves a class action lawsuit filed in 2018 by people who accused the Department of Education of ignoring their requests for loan forgiveness through a federal program known as the Borrower’s Repayment Defence. . He was threatened after several schools, including Lincoln Tech and Keizer University, said the deal failed to assess the validity of borrowers’ claims and would damage their reputations.

As part of the settlement, the Education Department identified 153 institutions — many of which are for-profit colleges — as having evidence of “serious misconduct…whether credibly alleged or, in some cases, proven.” “. Anyone who has attended these schools and applied for debt relief is entitled to full loan forgiveness under the agreement.

U.S. District Judge William Alsup of the Northern District of California gave colleges that raised objections an opportunity to speak, but ultimately finalized the settlement, upholding the Department of Education’s approach.

“The borrower defense agenda put in place by Congress has turned into an impossible quagmire,” Alsup wrote in his 25-page advisory on Wednesday. “The Secretary has developed a process to resolve the huge backlog of claims, and he has done so pursuant to specific authorization from Congress.”

In addition to automatic relief, the agreement provides for the repayment of monies paid to the Ministry of Education and credit repair to hundreds of thousands of eligible borrowers. A separate group of about 64,000 borrowers, who attended schools not on the department’s list, will also receive decisions on their applications on rolling timelines.

The agreement also guarantees borrowers who filed a claim after June 22, but before the judge finalized settlement, will have their claims resolved within three years. According to Wednesday’s opinion, this group of borrowers has now reached about 179,000 people.

“People are just thrilled,” said Eileen Connor, director of the Project on Predatory Student Lending, a group representing borrowers. “Hopefully that’s a way forward for people and for the Department of Education to move forward and have some sort of process that works.”

Jason Altmire, president and CEO of Career Education Colleges and Universities, an advocacy group for for-profit colleges, expressed disappointment with the decision and raised the specter of an appeal.

“The settlement represents an unlawful overreach by the Department of Education and unfairly exposes more than 150 institutions without any opportunity to respond,” Altmire said. “We hope the Ninth Circuit on appeal will recognize these fatal flaws and return the parties to the negotiating table.”

None of the four schools that intervened in the case immediately responded to requests for comment or confirmation of their intention to appeal.

Alsup’s decision will bring relief to dozens of people awaiting decisions on their borrower defense claims, some for up to seven years.

The collapse of for-profit chains Corinthian Colleges in 2015 and technical institutes ITT in 2016 — which spent their final days battling state and federal fraud charges — sparked a deluge of claims at the Education Department. Former Education Secretary Betsy DeVos declined to address the claims after taking office, saying the Trump administration needed time to review the process created under President Barack Obama.

The demands piled up before DeVos decided to grant partial debt relief, leading to legal action by former Corinthian students. DeVos said the case crippled the system. But the borrowers argued that it had no bearing on their claims and took legal action.

In 2020, the Trump administration agreed to deal with the backlog of claims within 18 months as part of an earlier settlement. Alsup rejected the deal months later after the Department for Education revealed its widespread denials of requests to cancel student debt.

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