$6B student loan debt cancellation settlement over fraud receives final approval

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Update:

• A federal judge in California gave the green light to the U.S. Department of Education’s plan to cancel $6 billion in student debt accrued by students claiming their colleges defrauded them. 
• The settlement resolves claims the Department of Education failed to process applications for debt cancellation brought by students arguing their schools misled them or engaged in conduct that violated state laws in a timely manner. 
• The judge overseeing the settlement agreement ruled it will provide “extensive relief” for the class of students. 
• The settlement will provide around $6 billion in total loan forgiveness for 75% of the class while streamlining the loan forgiveness for the remaining class members. 

Student loan debt settlement overview: 

• Who: The Department of Education has agreed to a class action settlement with around 200,000 student loan borrowers. 
• Why: The settlement will resolve claims the DOE stalled the borrower defense applications of around 200,000 student low borrowers. 
• Where: The class action settlement was proposed in California federal court.

(Aug. 05, 2022)

The U.S. Department of Education (DOE) has agreed to a class action settlement which will cancel the student loan debt of around 200,000 students whose claims had been stalled. 

The settlement will provide $6 billion in student loan debt relief for borrowers from more than 150 schools, including for-profit colleges and fraudulent universities such as Westwood College in Chicago, according to a news release put out by U.S. Senate Majority Leader Dick Durbin (D-IL). 

Individuals who were denied relief from the DOE when it was being overseen by former Secretary Betsy DeVos will also have their loans forgiven and compensated for amounts previously paid. 

The DOE has also agreed to process any remaining borrower defense applications involved in the class action lawsuit within the next six to 30 months, per the settlement agreement. 

Durbin said in a statement last week that he was “pleased to see the Department is correcting their previous inaction.” 

“Under the Trump Administration, former Secretary DeVos cruelly ignored the pleas of students defrauded by schools like Westwood College and left them to drown in student debt. Today, the Biden Administration and Secretary Cardona threw a $6 billion lifeline to these students,” Durbin said. 

Borrowers file aomplaint against DeVos, DOE over claim stalls

A class action lawsuit was originally filed against the DOE in 2019 by seven students who claimed the agency, under Devos, had refused to process their borrower defense claims. 

The students would go on to ask to represent a Class of any borrower who had their borrower defense claims hampered by the DOE, according to the release.  

A previous settlement agreement proposed by the DOE was rejected by the federal judge overseeing the case in the fall of 2020. 

The judge determined that DeVos and the DOE had found a way around honoring the proposal by denying the bulk of pending applications. 

Have you been affected by student loan debt? Let us know in the comments! 

The Student Loan Debt Class Action Lawsuit is Sweet, et al. v. Cardona, et al., Case No. 3:19-cv-03674, in the U.S. District Court for the Northern District of California.

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