- Education Sec. Miguel Cardona reached a settlement with thousands of student-loan borrowers.
- 200,000 borrowers who say they were defrauded will get full relief, and others will receive a written decision.
- This closes a years-long lawsuit that began under Betsy DeVos over stalled relief claims.
President Joe Biden's Education Department has agreed to give thousands of student-loan borrowers relief after they said they were defrauded by a for-profit school.
In 2019, Harvard Law School's Project on Predatory Student Lending brought a lawsuit against then-Education Secretary Betsy DeVos — known as Sweet vs. DeVos — representing thousands of student-loan borrowers who filed borrower defense claims with the department that had been pending for years. Those claims can be filed by borrowers who believe they were defrauded by a for-profit institution, and if the claim is approved, they are entitled to full student-loan relief. The claims ran up a backlog under DeVos, leading to the lawsuit.
On Wednesday evening, Biden's Education Secretary Miguel Cardona announced his department has agreed to a settlement, awarding 200,000 borrowers with stalled defense claims that could amount to $6 billion in relief.
"Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process," Cardona said in a statement. "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."
According to the settlement, those borrowers will receive refunds on any payments they made on their student debt, and the remaining 68,000 students who did not attend a school evaluated in the settlement will receive written decisions on their debt relief "correlating to how long they have already been waiting," with the longest pending claims getting a decision within six months of the agreement, and the most recent claims getting a decision within 30 months.
And if the department does not provide a decision to impacted borrowers within the specified timeframe, they will automatically receive full relief.
Eileen Connor, director of the Project on Predatory Student Lending, said in a statement that this "momentous proposed settlement will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government."
"It will not only help secure billions of dollars in debt cancellation for defrauded students, but charts a borrower defense process that is fair, just, and efficient for future borrowers," Connor said.
The Education Department has already taken a number of steps to reform the borrower defense process, most recently wiping out $5.8 billion in student debt for all remaining Corinthian College students in a group discharge, meaning the students did not have to file individual claims.
The department has also approved chunks of individual claims for defrauded borrowers from schools like ITT Technical Institutes and DeVry University, and it plans to continue improving the borrower defense approvals in its latest regulatory agenda.
A judge still needs to approve Wednesday's settlement and a hearing was requested for July 28.