On Thursday the education secretary announced that about 264,000 student loan borrowers will be given about $7.5 billion in debt relief under a settlement of claims. The settlement was made in a class action lawsuit in which lead plaintiff Theresa Sweet sued Betsy DeVos, the Trump-era Education Secretary, for routinely ignoring Obama-era regulations and denying relief claims. Some say this will allow an avenue forward for students saddled with college debts due to predatory loan practices.
Eileen Connor, director of the Project on Predatory Student Lending, issued a statement saying, “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. 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.”
The proposed settlement will still require court-approval in a July 28th hearing.
Under the settlement, two types of class members will be eligible for relief.
One group will be borrower defense applicants who have received a form denial notice from the Department of Education between December 2019 and October 2020 and had attended specific for-profit schools
The second group would be borrowers who attended schools not on the list. For them, loan denials will be reversed and class members’ loans will accrue zero interest until they either receive settlement relief or a final denial.
The Project for Predatory Student Lending’s website will have guidance on how to determine if you are a class member.
The type of class member will determine the type of relief available.
The first type of class member, of which there are about 200,000, will be entitled to, “automatically get “full settlement relief, which includes full discharge of their loans, refund of amounts paid, and credit repair,” according to the Project for Predatory Student Lending
The second type of class member, of which there are about 64,000, “will get decisions on their applications within rolling deadlines, based on how long their application has been pending.”
The second type will also be allowed to revise and resubmit their application if the initial review fails to grant them an approval. If the Department of Education misses any deadline, “the class member will automatically get full settlement relief.”
Joe Jaramillo, senior attorney at HERA, said in a statement, “Throughout this arduous legal battle, our clients continued to speak out and demand that the government make final decisions on borrower defense applications, so that students fraudulently induced into federal loans by predatory for-profit schools can have those loans canceled. This settlement does not remedy all woes and there is still a lot of work to be done to build a truly fair borrower defense process, but it does provide long overdue relief for our clients and a path toward justice for all borrowers.”
