Dive Brief:
- The U.S. Department of Education now has until the end of August to finish providing automatic student loan relief to a group of tens of thousands of borrowers who have not yet received forgiveness under a landmark $6 billion settlement agreement with the agency.
- In late 2022, U.S. District Judge William Alsup approved a class-action settlement that promised to cancel the loans of students who had accused the agency of stonewalling their applications for debt relief under a federal program.
- But the Project on Predatory Student Lending, or PPSL, one of the groups representing the borrowers, alleged in March that the department hadn’t provided automatic relief to all eligible borrowers by the agreed-upon January deadline. Alsup approved the updated timeline Wednesday and set new conditions for the Education Department to ensure pending issues are resolved.
Dive Insight:
The 2022 settlement sought to end the Sweet v. Cardona lawsuit, a multi-year legal battle between the Education Department and students who say the agency mishandled their applications for relief under the borrower defense to repayment program.
Borrower defense clears debts for students if they were defrauded by their colleges. But in 2019, borrowers accused the Trump administration’s Education Department of delaying decisions on their cases and then later improperly sending out blanket denials.
The 2022 settlement agreement called for the Education Department to automatically wipe away the debts of roughly 200,000 borrowers who attended one of 150-plus institutions, most of which were for-profit. It also promised to repair their credit and return the money borrowers had paid on student loans covered under the settlement.
Other parts of the settlement call for the Education Department to quickly make decisions on borrower defense claims for another 64,000 students and smooth out applications for 179,000 more. If those groups don’t receive decisions under specific time frames — which depend on when they submitted their claims — they can also receive automatic relief.
Automatic discharges for the group of 200,000 borrowers were expected to be completed by late January. But in March, PPSL said roughly one-third of those borrowers still had not received relief. The Education Department acknowledged some of these issues this week, though it said nearly 75% of the class members had had their eligible debts fully discharged.
In a Tuesday court filing, Richard Cordray, chief operating officer of the Education Department’s Federal Student Aid office, said nearly 48,000 class members with consolidated loans hadn’t received relief. The same was true for some 1,800 class members with unconsolidated loans.
Under the new timeline, the Education Department is required to provide relief to 5,500 class members by the end of May, another 30,000 class members by the end of July, and another 12,000 members by the end of August.
Agency officials and loan servicers must also attend three court hearings to report progress to Alsup.
In addition, the Education Department must hold biweekly meetings with loan servicers and the plaintiffs to resolve ongoing issues. And the agency must have a designated point of contact responsible for answering questions from class members about the status of their discharges, PPSL said in a news release.
Eileen Connor, president and executive director of PPSL, said the group looks forward to meeting with the federal agency.
“It’s time for the Department to stop their excuses and do what it takes to do right by class members,” Connor said Wednesday. “These delays were entirely avoidable and have kept tens of thousands of people from moving forward with their lives in real and meaningful ways.”
This is not the first snag the settlement has run into.
Three higher education institutions whose students qualify for relief under the settlement — American National University, Everglades College Inc. and Lincoln Educational Services Corp. — are appealing the agreement.
The 9th U.S. Circuit Court of Appeals heard oral arguments on the matter Dec. 5, and a decision is still pending. The three institutions had sought to block loan discharges for students who had attended their colleges until their appeal was resolved, but the court rejected that motion last year.