September 24, 2023

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After a legal challenge to halt implementation, a federal court will allow most student loan forgiveness and other debt relief to proceed under an approved settlement agreement that includes a repayment schedule from borrower defenses. Borrowers sought relief for years after alleging that their schools defrauded them.

The decision is separate from a separate, ongoing legal battle over President Biden’s one-time student loan forgiveness initiative, which will go before the Supreme Court later this week.

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Here’s the latest.

$6 billion in debt relief was temporarily suspended under student loan forgiveness and settlement

Last November, a federal judge approved a comprehensive settlement agreement to resolve Sweet v. Cardona, A long-running class action lawsuit between thousands of federal student loan borrowers and the US Department of Education. Borrowers claimed that the Department had stopped processing student loan discharge applications under Borrower Defense to Repayment, a federal program that can provide student loan cancellation and other debt relief for borrowers (ie, misrepresentation and other illegal conduct). The class of federal student loan borrowers also claimed that the Department of Education arbitrarily denied thousands of borrower protection applications with little or no meaningful review.

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Under the approved settlement agreement, the Biden administration agreed to enact $6 billion in federal student loan discharge. More than 200,000 borrowers who submitted borrower protection applications before June 2022, and attended one of several dozen institutions listed in the settlement documents, will be eligible for loan cancellations. Class members will also be entitled to a refund of past payments on their respective federal student loans as well as credit repair.

Implementation of the settlement relief was expected to begin in January. However, the three institutions listed in the settlement agreement then filed an appeal, seeking to block the settlement relief. The schools claimed that the settlement was “illegal”, that the process for reaching the settlement was unfair, and that being listed in the settlement agreement would damage the schools’ reputations and create “stigma”. A federal judge temporarily suspended implementation of the settlement agreement while he considered their arguments.

Court rules against challengers and allows student loan forgiveness to move forward under settlement

on Friday, overseen by a federal judge Sweet V. cardona The settlement resulted in a settlement against the three schools, the green light to begin settlement relief.

“Have these three intervening schools shown that they are likely to succeed on the merits of their appeals and suffer irreparable harm in the absence of a stay? This Order concludes that they have not ,” Judge William Alsup wrote in his letter. decision,

The judge further added, “The resolution of a lawsuit involving significant delays should not be further delayed by the three intervening schools, who were not parties to the Settlement Agreement and who were not in the long, hard-fought litigation.” The “relief provided by this settlement (financial and other)” will allow affected student loan borrowers to “breathe easy, sleep easy, repair their credit scores, take new jobs, enroll in new educational programs, finish their degrees.” , will allow to marry.” Start a family, support your children, manage homes and vehicles, and save for retirement. This will allow them to not only move forward, but to uplift others in the process of moving forward.

“This decision delivers a huge, long-overdue win for our customers and confirms the fact that this settlement is on solid legal ground,” said Eileen Connor, President and Director of Project on Predatory Student Lending – Student Organization representing the class loan borrower – in a statement. “Now, the hundreds of thousands of people and families who have been held hostage by the borrower protection process for so long will finally receive a fair resolution and justice.”

While the decision is a victory for borrowers, the court allowed a temporary, one-week stay relief for borrowers who attended the three intervening schools – Lincoln Educational Services Corp., American National University, and Everglades College, Inc. attended one of the to allow them to “present a motion for adjournment to our Court of Appeals.” This means that loan discharge and other debt relief for class members with borrower defense claims associated with those schools will not yet occur.

“We are so proud of our customers for staying in this fight and overcoming the countless obstacles along the way. We will stand by them to the end, including those who attended one of the intervening schools,” Connor said. The ongoing dispute involving the three intervening schools will go before the Ninth Circuit Court of Appeals, which will decide whether whether there should be a further delay in the implementation of debtor protection claims involving those schools.

Neither the Department of Education nor the Project on Violent Student Loans provided an updated timeline for the implementation of student loan forgiveness and other relief under the settlement agreement. However, the implementation is expected to take about a year.

The case is separate from Biden’s separate one-time student loan forgiveness

Sweet V. cardona The agreement is completely separate from President Biden’s one-time student loan forgiveness initiative to eliminate up to $20,000 in federal student loan debt for millions of borrowers. Relief under that initiative was also stalled due to legal challenges, and the administration has appealed to the Supreme Court. The court will hold a landmark hearing on Tuesday to hear oral arguments from the Biden administration and challengers, which include a coalition of Republican-led states and a conservative-leaning legal organization.

A decision on Biden’s student loan waiver plan is expected by June.

Further Reading Student Loan Forgiveness

What happens if the Supreme Court rejects Biden’s student loan forgiveness plan?

Student loan forgiveness: 5 things to know about the upcoming Supreme Court hearing

Republican senators file bill to end student loan moratorium, stop loan forgiveness

Student Loan Forgiveness: These Deferment and Forbearance Periods Can Count

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