A federal court on Thursday granted preliminary approval for a settlement agreement between the Biden administration and student loan borrowers to settle a long-standing class action lawsuit alleging deadlocked student loan forgiveness applications.
Here are the details.
Student loan forgiveness for borrowers who have been scammed by institutions
Last month, the Department of Education and a class of federal student loan borrowers agreed on a proposed joint settlement agreement to resolve Cute vs DeVos, a longstanding class action lawsuit. Borrowers filed the lawsuit years ago over allegations that the department stopped or delayed processing borrower defense requests under the Trump administration. The Borrower Defense Repayment Program can allow federal student loan cancellations for borrowers who have been defrauded by their school by making false promises and misrepresenting their educational program.
The proposed settlement agreement would provide $6 billion in student loan forgiveness to a quarter of a million federal student loan borrowers who have already filed petitions on borrower defenses. Attending dozens of schools — all for-profit entities — may automatically qualify these borrowers for relief under the proposed arrangement.
“We are pleased to have worked with the plaintiffs to reach a settlement that will bring billions of dollars in automatic relief to approximately 200,000 borrowers and which we believe will resolve the plaintiffs’ claims in a fair and equitable manner for all parties education minister Miguel Cardona said in a statement last month.
Judge grants tentative approval of settlement agreement, paving way for cancellation of student loan
While the parties agreed to a settlement last month, that settlement agreement is yet to be approved by the court.
Yesterday Judge William Alsup, who presided Cute vs DeVos Case, gave preliminary approval to the proposed settlement agreement and directed the parties to propose a timeline for final approval. Only when the settlement proposal has been finally approved by the court can the Ministry of Education begin to implement the Bafög termination. Attorneys for the student borrowers expect final approval sometime in the fall.
“The provisional approval is an important milestone for this settlement and for our clients, and brings us one step closer to finally providing reassurance to borrowers who have fought long and hard for a fair resolution of their defense claims.” said Eileen O’Connor, legal director of the Project on Predatory Student Lending, which is representing student loan borrowers in the lawsuit.
Following the court’s preliminary approval, the Department of Education will begin sending out notices to class members to allow them an opportunity to provide the court with comments on the proposed settlement agreement. Borrowers have until September 8, 2022 to submit comments.
“Details of the process are yet to be announced,” the Project on Predatory Student Lending said in a tweet on Thursday.
Borrowers can still apply for student loan forgiveness, but relief is not guaranteed
Under the proposed settlement agreement, only borrowers who have already applied for loan repayments and attended one of the covered institutions would be eligible for student loan cancellation pending final court approval.
However, there is still a window of opportunity where other borrowers may be able to benefit. Under the proposed agreement, borrowers who have attended one of the covered facilities and file a petition for borrower defense prior to final approval of the proposed agreement would be entitled to a decision by the Department of Education within 36 months. If no decision is made within this period, the borrower is entitled to cancellation of the student loan. However, if the Ministry of Education makes a decision within this period, attending one of the institutions covered does not guarantee relief; Borrowers would still have to prove that they were misled or defrauded by their school by making false statements or false promises about key program elements.
For more details see Cute vs DeVos and the tentatively approved Settlement Agreement, the Project on Predatory Student Lending has established a detailed informational website. Borrowers wishing to apply for a repayment loan can do so through the Department of Education website.
Note that in some cases, schools may withhold transcripts for borrowers who have been approved for repayment by the Borrower Defense.
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