Personal Finance

Student Loan Forgiveness Under Key Settlement Postponed As Court Considers Stay

The Education Department must temporarily delay the implementation of broad student loan forgiveness under an approved settlement as a court considers a request by several individual schools to pause the relief while they appeal.

Here’s the latest.

Three Schools Appeal $6 Billion in Student Loan Debt Relief Under Approved Settlement

Last November, a federal judge approved a landmark settlement deal in a class action lawsuit between the U.S. Department of Education and federal student loan borrowers. In the lawsuit, borrowers alleged that the department had illegally stalled processing student loan forgiveness applications under the Borrower Defense to Repayment program, which can provide debt relief to borrowers who were misled or defrauded by their schools. Borrowers also alleged that the department issued blanket, arbitrary denials of Borrower Defense requests without adequate review.

The case started off as Sweet v. DeVos, because it was initially filed during the Trump administration. But as the lawsuit dragged on over the course of several years, it became Sweet v. Cardona after President Biden and Education Secretary Miguel Cardona assumed office. The Biden administration ultimately agreed to settle with the class of borrowers last fall.

Under the settlement agreement that the court approved in November, the Biden administration would discharge approximately $6 billion in federal student loan debt for over 200,000 borrowers who submitted Borrower Defense applications prior to June 2022 and attended one of several dozen institutions on an approved list of mostly for-profit schools. Borrowers who submitted applications between June and November 2022 would be entitled to a decision within 36 months or they, too, could receive student loan forgiveness. Class members could also receive refunds of past payments and improvements to associated negative credit reporting.

Appeal Temporarily Derails Student Loan Forgiveness and Other Debt Relief Under the Settlement

Implementation of the debt relief, including the associated student loan forgiveness, was scheduled to begin last week. But three institutions named on the Sweet v. Cardona settlement list — Lincoln Educational Services Corp., American National University, and Everglades College, Inc. — filed an appeal. The schools characterized the settlement as “illegal” and argued that their inclusion on the list “unfairly harms their reputations and prejudices their rights” and would result in a “stigma.” The schools also argued that the settlement approval process was unfair.

In conjunction with the appeal, the schools asked the district court to stay (or delay) implementation of the settlement relief while they appeal. The court held a status conference today, and in the course of that conference, the judge scheduled a formal hearing on the schools’ request for February 15. The judge ruled that the discharges and other relief under the settlement cannot be implemented until the court rules on the motion for a stay. Meanwhile, the appeal will continue separately to the 9th Circuit Court of Appeals.

“We will not stop fighting until class members get the relief they deserve,” said the Project on Predatory Student Lending, the organization representing the student loan borrowers, in an earlier statement. “The District Court’s decision granting approval of this settlement is clear and unequivocal, and we are confident the Ninth Circuit will agree that the intervenors’ claims are without merit. As ever, we will continue to see this case through to the end.”

What Student Loan Borrowers Can Do

Borrowers who are class members and stand to benefit from the Sweet v. Cardona settlement can’t do much at this point, as the legal process simply has to play out, and court orders must be followed. However, the Project on Predatory Student Lending is encouraging borrowers to share their stories.

“It is helpful to show the Court the harm that any delay in settlement relief will cause class members,” says the Project. “If you believe you are a class member and would like to share how further delays in getting settlement relief would affect you, you can do so using this form.”

Further Student Loan Forgiveness Reading

Student Loan Forgiveness: These Deferment And Forbearance Periods May Count

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

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

Lawsuit Challenging Biden’s Student Loan Forgiveness Plan Gets Dismissed, But Legal Battle Continues

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