Department of Education to cancel $6B in student loan debt for defrauded borrowers

WASHINGTON — The Department of Education will cancel approximately $6 billion of student loan debt for borrowers who alleged in a class-action lawsuit that the agency ignored their claims for loan cancellations, officials said Thursday.

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The move will affect 200,000 people, The Washington Post reported. Under the proposed settlement, the Department of Education will immediately approve thousands of applications filed by people who claimed they were defrauded by the colleges, the newspaper reported.

The settlement agreement, filed in a San Francisco federal court, must be approved by a federal judge, according to The Wall Street Journal. Those who applied for relief will have their loans erased if they attended one of more than 150 schools named in Sweet v. Cardona, the 2019 class-action settlement, The New York Times reported.

The list includes DeVry University, the University of Phoenix, Grand Canyon University and other chains still in operation, according to the newspaper. It also includes colleges that have folded, including ITT Technical Institute, according to The Associated Press.

The deal reverses 128,000 rejections that were sent to relief applicants, a move that a federal judge called “disturbingly Kafkaesque,” according to the Times.

In a statement, Education Secretary Miguel Cardona said the Biden administration has worked to address issues regarding the “borrower defense to repayment” process, which is designed to provide federal loan forgiveness to students whose colleges lied to get them to enroll.

“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,” Cardona said.

The Biden administration had previously approved $25 billion in loan forgiveness for 1.3 million borrowers, according to CNN. Approximately 43 million Americans have incurred federal student loan debt, the news organization reported.

Earlier this month, the administration revived the borrower defense program, which was frozen by Betsy DeVos, the education secretary under President Donald Trump, the Times reported. It used the program this month to erase nearly $5.8 billion in loan debt for 580,000 borrowers who attended Corinthian Colleges, a chain that shut down in 2015 after extensive allegations of illegal recruiting tactics, the newspaper reported.

The agreement will provide automatic relief, according to the Post. That includes refunds and credit repair, according to the Project on Predatory Student Lending, a legal organization that represents former college students.

“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,” Eileen Connor, director of the group, said in a statement. “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.”


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