Student Loan Forgiveness Settlement Will Process 170K Applications

Following a student loan class action lawsuit, the Department of Education will begin processing around 170,000 loan forgiveness applications.

The action by the U.S. Department of Education and U.S. Education Secretary Betsy DeVos hinges on a proposed settlement that would resolve claims brought against the education authorities.

Borrowers in the student loan class action lawsuit say that the settlement would be “an enormous relief to know that students will finally have answers on their borrower defense.”

“For years, people have been paralyzed with debt and forced to put their education, personal goals, and financial plans on hold because we didn’t know if or when we might get a decision,” lead plaintiff Theresa Sweet said in a statement.

The Department of Education class action lawsuit claims that loan forgiveness applications were not processed in a timely fashion. The plaintiffs and proposed Class allegedly had “predatory” loans from fraudulent, for-profit colleges.

The Department of Education reportedly failed to process the plaintiffs’ applications – leaving them with uncertainty and financial burdens. The student loans class action lawsuit claimed that “the department’s halt in decision making was influenced by high-level department officials who had relationships to the for-profit colleges implicated by large numbers of borrower defense claims.”

The Department of Education class action lawsuit may be resolved by a recently proposed settlement between DeVos and the plaintiffs. Under the settlement, the department would have 18 months to make final decisions on around 170,000 applications for loan forgiveness. If the settlement is approved by the court, student loan borrowers could see significant relief within 21 months.

The student loans class action lawsuit settlement also includes strict penalties if the Department of Education and DeVos fail to comply with the terms.

For every month that the department fails to meet the settlement agreement’s terms, Class Member student loan debt will reportedly be reduced by 30 percent. If the Department of Education uses involuntary collection methods, Class Member student loans will be reduced by 80 percent.

The settlement will benefit individuals who borrowed student loans through the Department of Education’s Direct Loan or Federal Family Education Loan programs and who are still waiting for their loan forgiveness application to be processed.

The Department of Education notes that the settlement is a good option for student and taxpayers, as it eliminates unnecessary time litigating the issue.

“Rather than have their claims needlessly delayed by unnecessary litigation, students will now have their cases adjudicated promptly,” a Department of Education spokesperson said in a statement.

“The department put a sound adjudication methodology in place and Federal Student Aid has been adjudicating claims. This proposed settlement is validation of that process and of the Department’s longstanding goal to resolve all of these claims as quickly as possible.”

Similarly, class counsel from the Project on Predatory Student Lending at Harvard University’s Legal Service Center has voiced their approval of the settlement. However, the director noted in a statement that the department’s failure to cancel loans in a timely fashion remains “a stain on the federal student loan program.”

“The law is clear – students cheated by for-profit colleges should have their student loans cancelled,” the director said.

DeVos and her department also face a similar Department of Education class action lawsuit from students of Corinthian Colleges.

In this ongoing student loans class action lawsuit, DeVos and the department were found to be in contempt for their “minimal efforts” to comply with a court order halting collections on Corinthian student loan debt. As a result, DeVos and the Department of Education faced a $100,000 fine.

While this case is ongoing, the Project on Predatory Student Lending notes that students may face further difficulties when trying to get their loan debt cancelled, even if they have been defrauded by for-profit colleges.

The difficulties reportedly stem from an August 2019 rule announced by DeVos which implements “near impossible standards” for the loan cancellation process.

Due to these rules, defrauded students may be unable to get their student loans from ITT Technical Institute, Corinthian Colleges, the Art Institutes, Salter College, Brooks Institute of Photography and other for-profit schools cancelled.

Did you file an application for student loan forgiveness? Has your application been processed? Share your experiences in the comment section below.

The plaintiffs are represented by Joe Jaramillo and Natalie Lyons of Housing & Economic Rights Advocates and Eileen M. Connor, Toby R. Merrill, Kyra A. Taylor, and Joshua D. Rovenger of the Legal Services Center of Harvard Law School.

The Department of Education Class Action Lawsuit is Theresa Sweet, et al. v. DeVos, et al., Case No. 3:19-cv-03674, in the U.S. District Court for the Northern District of California.

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