Last week, a federal court granted preliminary approval for a landmark settlement agreement between President Biden’s Education Department and a class of student loan borrowers. The settlement is intended to resolve a lawsuit over stalled applications for student loan forgiveness for borrowers who allege that they were defrauded by their schools.
As the settlement process moves forward, here’s what borrowers need to know.
Borrower Defense to Repayment: Student Loan Forgiveness for Borrowers Misled By Their School
The settlement agreement is intended to resolve Sweet v. Cardona (formerly Sweet v. DeVos), a class action lawsuit that has been ongoing for several years. Student loan borrowers filed the lawsuit during the Trump administration years arguing that the Education Department was simply ignoring (and then subsequently arbitrarily denying) applications for Borrower Defense to Repayment relief.
The Borrower Defense to Repayment is a federal student loan cancellation program that can wipe out the federal student loan debt for borrowers who were misled by their schools through false promises or misrepresentations about admissions selectivity, career prospects, and other key program elements.
Proposed Settlement Agreement Provides for $6 Billion in Student Loan Forgiveness, if Approved
The proposed settlement agreement to resolve the Sweet case would provide $6 billion in student loan forgiveness for over 250,000 borrowers who attended one of dozens of schools on a proposed list of institutions. But first, the settlement has to go through a formal court approval process.
The parties cleared their first hurdle last week, when the judge overseeing the case granted preliminary approval for the proposed settlement agreement. But the process doesn’t end there.
Next, the Department must send out notices to all potential class members who might benefit from the proposed settlement. The Department will be using the last known contact information — including borrowers’ email and mailing addresses — to send out these notices. Borrowers will have the opportunity to provide formal comments on the proposed settlement agreement, and information on the comment process should be provided in the notices. Borrowers will have until September 15, 2022 to submit comments.
Barring any significant changes to the proposed agreement, the parties must then petition the court to grant final approval for the settlement by September 22. The court has scheduled a hearing on final approval for the proposed settlement agreement on November 3, 2022 (although that date could change).
Borrowers Who Already Submitted Borrower Defense Applications Don’t Have To Do Much
Under the proposed settlement agreement, borrowers who submitted Borrower Defense applications by June 22, 2022 and attended one of the schools on the proposed list don’t have to do much. If the court grants final approval for the settlement agreement following the hearing currently scheduled in November, these borrowers should have their applicable federal student loans discharged automatically.
Borrowers who submitted a Borrower Defense to Repayment application by June 22, 2022 but were denied by the Education Department between December 1, 2019 and October 31, 2020 should receive a notice that the denial has been rescinded.
Borrowers who have submitted an application and think they may be covered by the settlement relief should confirm that the Education Department has their Borrower Defense application on file. They should also ensure that their email and mailing addresses are up to date with the Department of Education’s StudentAid.gov website and its Borrower Defense website so that they can receive important communications about the settlement.
Borrowers Who Have Not Submitted Borrower Defense Applications For Student Loan Forgiveness Can Still Do So
Borrowers who did not submit a Borrower Defense to Repayment application by June 22, 2022 can still submit one. But they would not benefit in the same way from the settlement as class members.
Borrowers who submit a Borrower Defense to Repayment application after June 22, 2022, but before final approval of the settlement (which is currently scheduled for early November), and who attended one of the schools on the proposed list, would not be entitled to automatic student loan forgiveness, unlike the class members. However, these borrowers would be entitled to a final determination from the Education Department within three years of submitting their application. If the Department does not render a decision within that timeframe, they would be entitled to cancellation.
Borrowers who did not attend one of the schools on the approved list, or who submit a Borrower Defense application after final approval of the settlement, would still be entitled to have their application reviewed on the merits. But they would not receive any direct benefits from the Sweet settlement agreement, nor would they be guaranteed approval.
There Are Resources For Borrowers Pursuing Student Loan Forgiveness Through Borrower Defense to Repayment
Navigating Borrower Defense to Repayment and the Sweet v. Cardona settlement can be tricky. These are some important resources that borrowers can check out:
- The Department of Education’s Borrower Defense website.
- The Sweet v. Cardona settlement information page established by the Project on Predatory Student Lending, the organization representing the student loan borrowers in the lawsuit.
- A guide to Borrower Defense to Repayment written by the National Consumer Law Center.
- A guide to Borrower Defense to Repayment written by the New York Legal Assistance Group (NYLAG).