200,000 student borrowers get ‘grand slam’ after federal judge brings them closer to $6 billion in debt forgiveness

  • A federal judge has granted preliminary approval for a settlement that will relieve 200,000 defrauded borrowers.
  • This follows Biden’s Department of Education agreement on debt relief in June.

Thousands of student borrowers defrauded by for-profit schools have just taken one step closer to canceling their debt.

Borrowers who believe they have been defrauded by a school can file for a “borrower’s defense against repayment,” which grants such borrowers debt relief if they can prove a school’s wrongdoing. But under the leadership of former President Trump’s education secretary, Betsy DeVos, those claims have built up a backlog and left many borrowers saddled with debts that might have been eligible for discharge, prompting the Harvard Law School Predatory Student Loans Project to file a lawsuit in 2019 against DeVos.

Although the lawsuit was unresolved under the former administration, President Joe Biden’s Education Department announced in June that it was accepting a settlement that would award 200,000 defrauded borrowers about $6 billion in relief. — and Federal Judge William Alsup granted preliminary approval of the settlement last week, calling it a “grand slam” for borrowers.

“Preliminary approval is an important milestone for this settlement and for our customers, bringing us one step closer to certainty of finally providing certainty to borrowers who have fought long and hard for a fair resolution of their defense claims. ‘borrower,’ said the president of the predatory student project. Loan Eileen Connor said in a statement. “When our clients brought this case in 2019, it was based on the fact that many of them had already been waiting for years without a response, and the ailment only got worse with time. As always, our focus is our clients, and we look forward to helping them finally get the justice they are due.”

After preliminary approval, the Ministry of Education began sending notices to borrowers allowing them to submit comments on the proposed settlement until September 8. Alsup is also tentatively granting a number of motions to intervene in the settlement filed by for-profit schools who argued they would not have the opportunity to respond to borrower defense requests, which would damage their reputations. .

Jason Altmire, president and chief executive of Career Education Colleges and Universities – which represents for-profit institutions – said in a statement that he was “pleased” Alsup was allowing schools to step in.

“The parties’ proposed settlement unfairly damaged the reputations of more than 150 schools, all without the basic procedural fairness to which those schools are entitled under the Department’s own regulations,” Altmire said.

Since Biden took office, his education department has taken a number of steps to help students cheated by for-profit schools. In early June, he cleared $5.8 billion in student debt for all remaining borrowers defrauded by Corinthian College – the largest group discharge the department has taken to date. This came after smaller dumps, such as those from former students of ITT Technical Institutes and DeVry University.

If the settlement receives final approval, it will be important for the 200,000 borrowers who have been waiting for help for a long time. But Biden is also deciding whether he will forgive student debt for millions of federal borrowers, apparently considering $10,000 in relief for those earning less than $150,000 a year. He is expected to make that announcement by August 31, along with a decision on extending the student loan payment break after September.

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