Judge Grants Preliminary Approval of $6 Billion Student Loan Forgiveness Settlement – Forbes | Vette Leader

A settlement agreement that would grant loan forgiveness to over 200,000 federal student loan borrowers has been tentatively approved. Judge William Alsup of the Northern District of California ruled that the settlement was “fair, reasonable and reasonable for members of the class.”

The Sweet v Cardona case focuses on allegations that over 150 colleges and universities defrauded students by promising them earnings and employment outcomes they knew they could not deliver. The settlement will forgive over $6 billion in federal student loans if finally approved.

“Preliminary approval is an important milestone for this settlement and for our clients, and brings us one step closer to being one step closer to borrowers who have fought long and hard for a fair settlement of their defense claims,” ​​Eileen Connor, President and Director of the Project on Predatory Student Lending (PPSL
PSL
) said in a statement.

After provisional approval is granted, the Department of Education (ED) will begin communicating the settlement to class members. Members of the class have until September 8, 2022 to submit comments to the court on the settlement.

The case in question was a class action lawsuit filed in 2019 by PPSL on behalf of seven student borrowers. The case focused on delays in processing Borrower Defense to Repayment (BD) claims. The BD process offers students who have been scammed by an institution a way to have their loans forgiven when it is clear that the institution did not provide the education it promised students when they were hired.

From 2015 to 2019, the students represented in the lawsuit filed BD lawsuits against their former universities, alleging that the institutions they attended falsely promised a quality education, excellent training, and well-paying jobs available after graduation they waited. By the end of 2016, ED had processed these applications and approved nearly 28,000 applications.

Processing of BD claims ground to a halt under the Trump administration. Under former Secretary DeVos, the Department of Ed refused to process BD claims for more than a year and left claims in limbo for up to four years. In Spring 2020, ED began issuing blanket denials of BD claims using mail merges. The Biden administration will retract those earlier denials as part of the settlement.

Several schools (Lincoln Educational Services Corporation, American National University, Everglades College, Inc., and The Chicago School of Professional Psychology) filed to intervene in the case and found that they disagreed with the settlement. The schools trying to intervene claim that the settlement would violate their due process rights and also want to ensure they are not held financially responsible for forgone loans.

The schools that tried to intervene tried to claim that their rights were overridden by the decision. Everglades College representative Jesse Panuccio said: “They are taking away all our rights. We have to protect ourselves.” This argument was met with skepticism from Alsup, who said, “You’re the luckiest guy in the room. You get all the money and you don’t have to pay it back,” he said. “It’s a process where the government forgives the credit and gives you a chance to do your two cents before you go down that route. I don’t see much harm for you.”

Alsup has given the colleges until August 25 to submit additional requests to intervene in the case, but has not ruled on any of the colleges’ current requests to participate in the case.

ED has stated that the schools named in the settlement will not be held financially responsible for forgiven loans. ED has stated that it intends to use its settlement powers to forgive the loans rather than defend the borrower in order to simplify and expedite the forgiveness process.

Students who attended the institutions mentioned in the case but did not apply for a BD before June 22, 2022 will not be included in the comparison. However, students who attended any of the colleges mentioned in the case may apply for BD before the case is finally approved. Under the terms of the Settlement, students claiming BD between June 22, 2022 and final settlement approval will be notified of decisions on their claims within 36 months of the settlement final approval date.

Alsup has set November 3 for a final approval hearing on the case.

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