Student loan borrowers will benefit from what is now the largest class-action settlement in U.S. history.
According to information shared by Federal Student Aid, seven student loan borrowers filed a lawsuit in United States District Court for the Northern District of California regarding how the Department of Education handled borrower defense applications. As AFROTECH™ previously reported, the lawsuit referenced years of delays by the Department in issuing decisions on thousands of applications. The denials of some date back to December 2019.
Borrower defense outcomes often result in borrowers not having to repay a loan if a school showed deception or misrepresentation, reports Project on Predatory Student Lending (PPSL), a co-representative for the plaintiffs in the case.
The case was previously known as Sweet v. Cardona and Sweet v. DeVos but is now titled Sweet v. McMahon and considers nearly all “borrowers with pending borrower defense applications filed on or before June 22, 2022.”
In 2022, the Department of Education stated that 200,000 borrowers from predatory schools would have their federal student loans canceled and that the remaining class members’ defense applications would be handled by honoring court deadlines, according to a press release.
The settlement also said there would be deadlines for the Department to provide a decision on borrower defense applications between June 23, 2022, and Nov. 16, 2022, as well. This held the Department accountable, with the condition that full settlement relief would be applied if decisions were not administered on time, the press release noted.
However, there were delays from the Education Department via motions and appeals after it missed a decision deadline that triggered automatic relief for an additional 170,000 borrowers. A federal appeals court has rejected its request for further delays, leading to a $23 billion settlement, per the press release. The settlement is the largest settlement against the U.S. federal government and the largest class-action settlement in American history, PPSL notes.
PPSL claims it has “secured the cancellation of $50 billion of fraudulent student debt on behalf of borrowers who attended dozens of predatory schools.” These schools include ITT Technical Institute, Corinthian Colleges, University of Phoenix, and the Art Institutes.
“This is a huge accomplishment and one that would not have been possible without the tireless efforts of our plaintiffs, the borrower community, and, of course, the small but fierce team at PPSL,” said Eileen Connor, president and executive director of PPSL, according to the press release. “But the work isn’t over: to anyone out there struggling with predatory student debt, we see you. And to anyone out there looking to exploit students, we see you too.”
Plaintiff Theresa Sweet commented:
“This case was always about borrowers coming together to stand up for what was right. Through the ups and downs of the last seven years, we became a community united by the belief that what happened to us was wrong, and it became clear just how many people had been harmed by the same broken systems. With PPSL fighting alongside us every step of the way, we refused to give up. I’m incredibly proud of what we’ve accomplished together, but this isn’t the end of the story. There are still people waiting, and we’ll keep fighting until no one is left behind. I hope our fight means that someday no one else has to go through what we did.”
The press release said that more than 1,000 class action members are waiting on actions from the Department of Education on loan discharges, refunds, and other relief.
Additionally, the number of borrower defense applications has increased another 210,000.
