200,000 student loan borrowers just got $6 billion in debt relief

  • A federal judge has granted final approval to a settlement involving defrauded student loan borrowers.
  • 200,000 borrowers are expected to get $6 billion in debt relief, and the department will look into other outstanding requests.
  • The 2019 lawsuit was filed in response to a backlog of borrower defense claims that hadn’t been processed.

Thousands of student loan borrowers will soon receive long-awaited debt relief.

Federal Judge William Alsup granted final approval of a lawsuit on Wednesday – sweet v. Cardona — filed in 2019 by student loan borrowers who at the time accused the Department of Education of failing to process the borrower’s defense for repayment applications. These are forms that borrowers can submit if they feel they have been scammed by the school they attended. If the department approves their forms, they would qualify to have their student loans repaid.

The lawsuit went unresolved under former President Donald Trump’s administration, and in June, President Joe Biden’s education department agreed to a deal that would have given $6 billion in relief to 200,000 student loan borrowers. Alsup just signed that deal after allowing some for-profit schools to step into the deal who argued they didn’t have the ability to respond to borrower defense claims, hurting their reputations.

“This order finds that all members of the class, including our named plaintiffs, have correctly asserted actual and material damages arising out of the secretary’s alleged wrongful handling of their borrower defense claims,” ​​Alsup wrote in its opinion, referring to former Trump education secretary Betsy DeVos. “The harm is twofold. The Secretary’s improper delay and suspension of processing debt relief requests directly led to specific economic harm for each member of the class. The illegal delay of debt relief results in clear harm monetary”.

The department has identified 153 schools in the settlement that it has found to be engaging in misconduct, and anyone who attended those schools will receive full and automatic relief. In addition, an additional 64,000 borrowers who attended schools not on the list will receive decisions about their rolling maturity benefits, based on how long their applications are pending.

Alsup also wrote that borrowers who filed borrower defense applications after June 22, when the deal was finalized, would receive notice of the status of their application within three years.

Eileen Connor, president and director of the Project on Predatory Student Lending – the organizations that represented the borrowers in the deal – said in a statement on Tuesday that it is “a life-changing and long-awaited victory for our customers who have fought tirelessly in this box.”

“It offers immediate certainty and relief to borrowers who have been waiting years for a fair resolution of their borrower defense claims,” ​​he added. “Throughout this case, our clients have highlighted a fundamentally broken borrower defense system and the urgent need for reforms to hold predatory schools accountable.”

Biden’s announcement of up to $20,000 student loan forgiveness shouldn’t affect this deal: Affected borrowers will still get the relief they’re entitled to, regardless of the outcome of the lawsuits that have so far stalled the debt relief of the president.

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