The class action lawsuit accused the Trump administration, and later the Biden administration, of illegally delaying for several years any action on applications that borrowers filed with the Department of Education for debt relief.
Under the proposed agreement, which has yet to be approved by a judge, the Biden administration will forgive the student loan debts of hundreds of thousands of borrowers who have already filed a lawsuit against one of the 50 colleges, most of which are for-profit institutions. These borrowers will also be reimbursed for payments they have already made under the agreement.
Approximately 74,000 borrowers are those whose claims were rejected in the final years of the Trump administration. These wide-ranging denials thwarted early settlement in the case after the judge in 2020 criticized the decisions, calling them without sufficient explanation and “alarmingly Kafkaesque”. Under the proposed settlement, the Biden administration has now agreed to reverse those decisions.
Eileen Connor, director of the Harvard Law School Project on Predatory Student Lending, who brought the lawsuit, called the proposed settlement a “historic” agreement that “will provide answers and reassurance to borrowers who have fought long and hard to get their borrower a fair decision.” defense claims after being duped by their schools and ignored or even rejected by their government.”
“This will not only help secure billions of dollars of debt relief for defrauded students, but will outline a borrower protection process that is fair, fair and efficient for future borrowers,” Connor said in a statement.
Education Minister Miguel Cardona said in a statement that he was delighted to reach “an agreement that will automatically provide billions of dollars in bailouts to approximately 200,000 borrowers and that we believe will settle plaintiffs’ claims in a fair and equitable manner for all parties.” “.
The agreement aims to eliminate a large backlog of “borrower protection” lawsuits that predated the Biden administration but only increased during his time in office.
Under the proposed settlement, the full repayment of the loan for about 200,000 borrowers would wipe out about three-quarters of the pending claims. The rest of the claims — from about 68,000 borrowers — will have to be handled by the Department of Education on a case-by-case basis. The Biden administration agreed as part of the deal to settle the remaining claims within six to 30 months, depending on how long the application has been pending.
It is unclear whether the Department of Education will seek to recover any costs of forgiving loans from these institutions, or whether department officials have made any findings of misconduct against schools or their owners.
Loan relief under the settlement is limited to borrowers who have already completed an application with the Department of Education. The question remains whether the agency will take steps to expand assistance to borrowers who attended schools at the same time but did not file claims in the borrower’s defense.
The proposed settlement follows Vice President Kamala Harris’ announcement earlier this month that the Department of Education will cancel all remaining $5.8 billion in student loan debt for 560,000 borrowers who attended the now-defunct Corinthian Colleges for-profit school network – at on the same grounds that the borrowers were deceived.
But the deal also came after months of mounting frustration with the way the Biden administration has handled a backlog of grievances that predate their tenure but continue to mount. Two additional claims were filed against the Biden and Cardona administrations over the past few months, accusing the Department of Education of illegally delaying the consideration of groups of requirements.
Progressives have been frustrated that the Biden administration continues to defend itself against a lawsuit challenging the delays. And they were particularly alarmed that the Justice Department was siding with lawyers for former Education Secretary Betsy DeVos, arguing that DeVos should not be required to testify in the case.
9th Circuit Court of Appeals decided in February with a score of 2:1 that DeVos cannot be forced to testify in the case.
An appeals court ruled that the DeVos Department of Education acted in bad faith in rejecting a large number of loan forgiveness applications, but ruled that the case was not up to high standards in order to compel the former cabinet secretary to testify.
The Department of Education and the plaintiffs in the case asked the judge hearing the case to hold a settlement hearing on July 28.