- The U.S. Department of Education may proceed with granting $6 billion in student loan forgiveness to defrauded students, following the Supreme Court’s ruling.
- Eligible borrowers include those who submitted a borrower defense request before June 22, 2022 and attended one of the 151 schools.
The Supreme Court last week refused to block the settlement of a class action lawsuit brought by student borrowers who claim their schools defrauded them. Now, the US Department of Education will be able to continue honoring the $6 billion loan forgiveness agreement.
More than 150 schools, mostly for-profit institutions, participated in the agreement.
Three of those institutions — Lincoln Educational Services Corp., American National University and Everglades College Inc. — had filed petitions with the Supreme Court. They argued that they had been deprived of due process with the agreement and that it damaged their reputation.
Consumer advocates applauded the judges’ decision.
“Today’s swift and decisive action by the Supreme Court should put an end, once and for all, to any ongoing debate about the legitimacy of this settlement,” said Eileen Connor, president and director of Predatory Student Lending. Project.
Career Education Colleges and Universities, a trade association representing for-profit colleges, did not immediately respond to a request for comment.
Here’s what borrowers need to know about the deal.
The relief is the result of a class action lawsuit brought by the borrowers
Beginning in 2015, the US Department of Education was inundated with loan cancellation requests from students who said their school had misled them. The government has the power to cancel federal student loan debt when the borrower’s school is found guilty of misconduct.
A large backlog of claims led a group of borrowers to file a class action lawsuit against the department in 2019, demanding faster redress.
The litigation has been going on for years, with the Trump administration at one point issuing notices denying requested relief to some 128,000 borrowers.
However, in June 2022, the borrowers and the government reached an agreement. Under its terms, tens of thousands of borrowers were eligible for debt relief. These students were attending one of 151 schools accused of misconduct.
The government has also agreed to review and decide on applications from thousands of other borrowers within a specified time frame.
The judges’ decision last week means the deal will remain in place.
Eligible borrowers will get repayments, debt will be erased
In the agreement, you can find a list of the schools involved in “Exhibit C”. The Predatory Loan Project also has a list of all institutions included, most of which are for-profit schools. The project represented the borrowers in the lawsuit.
If a borrower attended one of these colleges and applied for Borrower Defense Loan release by June 22, 2022, they should be eligible for automatic relief, said higher education expert Mark Kantrowitz.
Even though their request was previously denied, Kantrowitz added, they should now qualify.
Borrowers eligible for automatic relief will likely be released no later than January 28, 2024.
In addition to having the debt erased from your record, some borrowers may see money as part of the deal.
“This will include a refund of any payments made previously,” Kantrowitz said.
Other borrowers who attended schools not on this list but filed for a borrower defense should benefit from a simplified and faster review of their claim under the settlement.
Case unrelated to Biden’s student loan cancellation
The Biden administration’s sweeping plan to forgive up to $400 billion in student debt is currently being considered by the Supreme Court, with a decision expected in June.
This policy has nothing to do with the class action lawsuit filed by allegedly defrauded borrowers.