Settlement providing $6 billion in student loan forgiveness removes hurdle: 5 key takeaways

Last week, a federal court granted preliminary approval to a landmark settlement agreement between President Biden’s education department and a class of student borrowers. The settlement aims to resolve a lawsuit over blocked student loan forgiveness applications for borrowers who allege they were defrauded by their schools.

As the settlement process moves forward, here’s what borrowers need to know.

Borrower defense until repayment: student loan forgiveness for borrowers misled by their school

The settlement agreement seeks to resolve Sweet vs. Cardona (Previously Sweet vs. DeVos), a class action lawsuit that has been going on for several years. Student loan borrowers sued during the Trump administration years arguing that the Department of Education was simply ignoring (and then arbitrarily denying) borrower defense requests for relief. of the refund.

Borrower Defense of Repayment is a federal student loan forgiveness program that can erase federal student loan debt for borrowers who have been misled by their schools by false promises or misrepresentations regarding the admissions selectivity, career prospects and other key program elements.

Proposed settlement agreement provides $6 billion in student loan forgiveness, if approved

The proposed settlement agreement to resolve the Sweet would provide $6 billion in student loan forgiveness to more than 250,000 borrowers who attended one of dozens of schools on a proposed list of institutions. But first, the settlement must go through a formal court approval process.

The parties cleared their first hurdle last week, when the judge handling the case granted preliminary approval to the proposed settlement agreement. But the process does not end there.

Next, the Department must send notices to all potential class members who could benefit from the proposed settlement. The Department will use the last known contact information – including borrowers’ email and mailing addresses – to send these notices. Borrowers will have the opportunity to provide formal comments on the proposed settlement agreement, and information about the comment process must be provided in the notices. Borrowers will have until September 15, 2022 to submit their comments.

Unless there are material changes to the proposed settlement, then the parties must ask the court to grant final approval of the settlement by September 22. The court has scheduled a hearing on the final approval of the proposed settlement agreement for November 3, 2022 (although that date may change).

Borrowers who have already submitted Borrower Defense Requests do not have much to do

Under the proposed settlement agreement, borrowers who submitted Borrower Defense Claims before June 22, 2022 and attended one of the schools on the proposed list have little to do. If the court grants final approval of the settlement agreement following the hearing currently scheduled for November, these borrowers should have their applicable federal student loans automatically discharged.

Borrowers who submitted a Borrower Defense Request for Reimbursement by June 22, 2022 but were denied by the Department of Education between December 1, 2019 and October 31, 2020 should receive notice that the denial has been cancelled.

Borrowers who have submitted a claim and believe they may be covered by settlement relief should confirm that the Department of Education has their borrower defense claim on file. They should also make sure their email and mailing addresses are up-to-date with the Department of Education’s website and its Borrower Advocacy website so they can receive important communications about the settlement. .

Borrowers who have not submitted Borrower Defense Requests for Student Loan Forgiveness can still do so

Borrowers who did not submit a Borrower’s Defense to Reimbursement Request by June 22, 2022 may still submit one. But they would not benefit from the settlement in the same way as class members.

Borrowers who submit a Borrower Defense Request for Reimbursement after June 22, 2022, but before final settlement approval (which is currently scheduled for early November), and who attended one of the schools on the proposed list, would not be eligible for automatic student loan forgiveness, unlike class members. However, such borrowers would be entitled to a final decision from the Department of Education within three years of submitting their application. If the Ministry does not render a decision within this period, they would be entitled to cancellation.

Borrowers who did not attend one of the schools on the approved list, or who submit a Borrower’s Defense Claim after final settlement approval, would still be entitled to have their claim considered on the merits. But they would receive no direct benefit from the Sweet settlement agreement, and their approval would not be guaranteed.

There are resources for borrowers who want to get student loan forgiveness through Borrower Defense Until Repayment

Navigating from borrower’s defense through to repayment and Sweet vs. Cardona settlement can be tricky. Here are some important resources borrowers can consult:

Further Reading on Student Loans

Biden administration ready to implement mass student loan forgiveness as decision could come any day

5 Growing Signs Biden Could Endorse Broad Student Loan Forgiveness and Extended Student Loan Pause

Did the Biden administration just drop a big hint on student loan forgiveness?

If You’ve Been To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do

Dorothy H. Lewis