Borrower-defense settlement to repay $6 billion in loans

A federal judge approved a settlement in a class action lawsuit against the U.S. Department of Education that argued the agency ignored the borrower's defense against the claims.

As part of the settlement, 200,000 borrowers who attended one of the 153 institutions identified by the Department of Education will have all of their federal student loans forgiven, which totals approximately 6 billion dollars for the group. Another 64,000 borrowers will receive final decisions on their borrower defense claims. Most of the institutions listed are for-profit colleges or universities.

"This is a life-changing and long-awaited victory for our clients who have fought tirelessly in this case," said Eileen Connor, president and director of the Project on Predatory Student Lending, which has filed a lawsuit in 2018. certainty and relief for borrowers who have waited years for a fair resolution of their borrower defense claims. Throughout this case, our clients have exposed a fundamentally flawed borrower defense system and the urgent need for reforms to hold predatory schools accountable.

The Borrower's Repayment Defense Program allows borrowers to seek relief if their college or university misled them or violated certain state laws. The program began in 1994 but was not widely used for relief until May 2015 when the for-profit Corinthian Colleges closed. The Obama administration has approved more than 90% of borrower defense applications, according to the settlement, but the pace of approvals has slowed under the Trump administration. The lawsuit sought to force former education secretary Betsy DeVos to resume granting or denying requests.

The settlement is not a successful or approved borrower defense claim, so the department will not be able to seek repayment of the discharged loans. In addition, the department has not issued any formal rulings of misconduct against the institutions involved.

American National University, Chicago School of Professional Psychology, Everglades College Inc. and Lincoln Educational Services Corporation have sought to intervene in the lawsuit, agreeing to their listing on the list of 153 institutions, "which they call a letter scarlet", the settlement states.

Career Education Colleges and Universities, which represents the private higher education sector, said in a statement it was disappointed with the settlement.

"The four intervening schools have made a compelling case that the Sweet Settlement represents an unlawful overreach by the Department of Education and unfairly exposes more than 150 schools with no opportunity to respond," CECU President Jason Altmire said in a statement. a statement. "We are disappointed that Judge Alsup ignored these flaws and approved the settlement. We hope the Ninth Circuit on appeal will recognize these fatal flaws and return the parties to the negotiating table.

Education Secretary Miguel Cardona said in a statement that the administration was happy with the settlement.

"Going forward, the Department of Education will continue to strengthen oversight and enforcement of colleges that mislead students and work to uphold the Biden-Harris administration's commitment to help students who were harmed," Cardona said.