Yesterday, California Federal Judge William Alsup approved the cancellation of over $6 billion in federal student loan debt for the 200,000 borrowers who have pending borrower defense to repayment claims.
Sweet v. Cardona was a lawsuit filed by borrowers who claimed that the US Department of Education failed to act on their borrower defense claims while under Trump administration leadership.
Borrower defense to repayment is a federal student debt relief program that discharges some or all of a student’s federal student loan balances if the school misled or defrauded them. Students are only eligible for program cancellation if their school misrepresented important details such as admissions practices, loan details, or program costs.
Sweet v. Cardona argued that the ED failed to properly assess thousands of borrower defense claims under the leadership of former Education Secretary Betsy DeVos. Yesterday’s decision is a long-awaited victory for the students involved. The suit was first filed in 2019, and the ED announced the initial proposed agreement in June 2022, nearly six months ago.
“We are pleased with yesterday’s borrower defense court decision, which approved the settlement, which will provide billions of dollars in relief to over 200,000 borrowers,” Education Secretary Miguel Cardona said in a statement. “It will also resolve plaintiffs’ claims in a fair and equitable manner,” he added, vowing that the administration will continue to strengthen oversight and accountability for America’s colleges and universities.
Students who filed a borrower defense claim by June 22, 2022 and attended one of the 153 eligible schools could have their loans canceled within a year of the court’s official decision, according to the settlement agreement. They will also receive credit score adjustments and refunds for previous payments.
According to a FAQ page created by the Project on Predatory Student Lending, those who applied between June 22 and November 16 may be eligible for some benefits under the agreement guidelines. Within 36 months of the Nov. 16 settlement approval date, these students should receive an application decision. Borrowers are eligible for forgiveness if they do not receive a decision from the ED within 36 months, just as if they applied before the original June deadline.
While yesterday’s verdict is a step in the right direction for the students involved, it is possible that if Alsup’s decision is appealed, the federal appeals court will overturn it.
Dr. Jason Altmire, president and CEO of Career Education Colleges and Universities, stated his opposition to the ruling, claiming that it is illegal and “unfairly maligns over 150 institutions without any opportunity to respond.” CECU represents many of the schools listed in the settlement agreement and has been heavily involved in the development of the lawsuit.
“We are disappointed that Judge Alsup failed to notice these flaws and approved the settlement,” Altmire said in a statement. “We anticipate that the Ninth Circuit will recognize these fatal flaws on appeal and return the parties to the negotiating table.”
It is important to note, as with student loan forgiveness appeals, that this decision is not final if appealed. Borrowers can use this time to prepare for the resumption of their student loan payments while waiting for the latest news on the status of the settlement agreement.
Borrowers should not rely on court decisions or legislation to erase their student loans due to the legal factors involved. At this time, the ED has not announced any plans to extend the forbearance expiration date of December 31. Borrowers who are unsure about their upcoming payments should plan ahead of time and look into federal relief programs.