Schools Seek To Block $6 Billion In Student Loan Forgiveness Under Approved Settlement

Three schools have taken steps to appeal a settlement agreement that, if implemented, would result in an estimated $6 billion in student loan forgiveness for over 200,000 borrowers. Implementation of the agreement was set to begin this week, but now borrowers who stand to benefit from the settlement may have to wait.

Here’s the latest.

$6 Billion in Student Loan Forgiveness To Settle Class Action Suit

In November, a federal court approved a settlement agreement between the U.S. Department of Education and a class of federal student loan borrowers to resolve a long-running lawsuit over stalled student loan forgiveness applications under the Borrower Defense to Repayment program. The Borrower Defense program can provide student debt relief, including loan cancellation, for borrowers who demonstrate that their school made material misrepresentations or false promises about key elements of their degree program such as admissions selectivity, the transferability of credits, or employment prospects.

In the case, Sweet v. Cardona (previously Sweet v. DeVos, as the case was first filed against the Trump administration), the class of student loan borrowers argued that the Education Department had illegally delayed processing tens of thousands of Borrower Defense applications, in some cases for years, or issued arbitrary denials without even fully reviewing borrowers’ claims. The lawsuit dragged on after President Biden took office in 2021.

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Under the settlement agreement, the Biden administration would provide $6 billion in student loan forgiveness for over 200,000 borrowers who submitted Borrower Defense applications prior to June 2022 and attended one of the schools on an approved list of institutions. Borrowers would also be entitled to refunds of past payments as well as credit repair. A federal judge formally approved the settlement last fall, and implementation was set to begin this week.

Schools Appeal Settlement, Delaying Student Loan Forgiveness

Three schools impacted by the settlement agreement — Lincoln Educational Services Corp., American National University, and Everglades College, Inc. — have appealed the judge’s approval of the settlement, arguing that they “cannot accept an illegal settlement that unfairly harms their reputations and prejudices their rights.” The schools complained that there would be a “stigma” attached to mass Borrower Defense approvals, and that it is improper for individual borrower claims to be approved “without any administrative process, judicial factfinding, or reasoned decision on the merits.”

Attorneys representing the class of student loan borrowers who stand to receive student loan forgiveness through the settlement agreement blasted the appeal.

“This appeal demonstrates just how desperate these schools are to deny justice for borrowers, and we will not stop fighting until students get the relief they deserve,” said Eileen Connor, President and Director of the Project on Predatory Student Lending (the organization representing the borrowers) in a statement. “The court’s decision granting approval of this settlement is clear and unequivocal, and we are confident the [appeals court] will agree with [the district court judge] that these claims are without merit. As ever, we will continue to see this case through to the end.”

Notably, the trial court judge had previously given the schools an opportunity to intervene in the suit, but ultimately concluded that “unlawful delay of debt relief results in clear monetary harm” to borrowers.

What This Means For Borrowers Expecting Student Loan Forgiveness Through the Sweet Settlement

As part of the appeal, the three schools have also filed a motion to stay implementation of the settlement, pending their appeal. This means that they are asking the appeals court to block any student loan forgiveness and other relief provided by the settlement agreement until the appeal is decided.

Under the proposed settlement agreement, the Education Department was set to start implementing the debt relief after January 17, and covered borrowers would receive student loan forgiveness and other relief within a year. That timeline may now be delayed — and the extent of that delay will ultimately be determined by the federal appeals court.

This is the latest setback for the Biden administration’s efforts to provide student debt relief, as a number of other student loan forgiveness initiatives are also facing delays or complications.

Further Student Loan Forgiveness Reading

Your Student Loan Forgiveness Is Getting Delayed, And It May Get Worse

Big Student Loan Forgiveness Update As Education Department Clarifies Eligibility For One-Time Adjustment

Biden Announces New Student Loan Plan: 8 Big Details On Forgiveness And Payments

Here’s What You’ll Pay, And When You’ll Get Student Loan Forgiveness, Under Biden’s New Plan

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