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ED Settles an Additional 200,000 Borrower Defense Claims

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

An additional 200,000 student loan borrowers who claim they have been defrauded by their institutions will have their loans discharged by the Biden administration, with the Department of Education (ED) agreeing to a settlement concerning pending borrower defense claims.

This most recent action on borrower defense claims — which will still need to be approved by the court — follows ED’s ramped up efforts to process discharges. In total, the approved claims would wipe out roughly $6 billion in outstanding federal student loan debt.

“Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” said Education Secretary Miguel Cardona. “We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.”

In the legal filings ED requested that the court hold a hearing on the agreement on July 28, 2022 to approve the settlement and hear from borrowers, so that the relief can take effect.

The court case, dubbed Sweet v. Cardona (previously Sweet v. DeVos), was filed in 2019 and the settlement was reached between ED and The Project on Predatory Student Lending at the Legal Services Center at Harvard Law School.

Ahead of the court hearing, proprietary schools have urged the independent federal judge, who will oversee the proceeding, to carefully consider the agreement and expressed concern over ED’s process.

“We are deeply concerned that in its haste to respond to outside political pressure, the U.S. Department of Education is attempting to approve wide swaths of claims without regard to individual merit,” said Career Education Colleges and Universities’ (CECU) President and CEO, Jason Altmire. “The Department has an obligation to take a more measured approach to determine if each student has been financially harmed based on an unlawful act. The Court should look carefully at the settlement agreement to ensure it is fair for all parties involved.”

Correction 7/22/22: This article was updated to clarify that the borrowers whose loans may be discharged have claimed they were defrauded by their institutions. While this lawsuit concerns the adjudication and processing of pending borrower defense claims, it does not make a finding on the merit of those claims.

 

Publication Date: 6/24/2022


Thomas K | 6/24/2022 12:22:16 PM

Biden vote buying. Has nothing else to run on.

Jeff A | 6/24/2022 10:20:37 AM

This is irresponsible. The implications and fallout will be incredibly problematic. This is going to be a catalyst to upset the entire BDR process going forward and damaging to some existing institutions without cause.

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