2019 pardon lawsuit settled and $6 billion awarded

BrianAJackson/Getty Images/iStockphoto

As the Biden administration sweeps student loan forgiveness program is still stuck after a Texas federal court judge ruled it “unlawful” last week, there has been some traction in a separate but related case.

Student loans: Will Biden extend repayment pause as relief program stalled?
Discover: 5 things you need to do when your savings hit $50,000

Late on Wednesday, November 16, Federal Judge William Alsup moved to approve a settlement in an ongoing lawsuit related to the Borrower Defense Program. It will provide a total of $6 billion to 200,000 borrowers of federal student loan funding.

The class action lawsuit, Sweet v Cardona (formerly Sweet v DeVos), was first filed in 2019 when Donald Trump was president. He accuses the Department of Education during his tenure (led by former Secretary Betsy DeVos) of “failing to process their borrower defense requests through to reimbursement,” Business Insider reports. Of course, this position is now occupied by Miguel Cardona, hence the name change of the business.

The Borrower Defense Scheme was first instituted by the government in late 2016, per Inside Higher Ed, allowing borrowers who thought they had been “scammed” by their college or university the opportunity to apply for repayment of their student loans.

As noted by Forbes, applicants could seek cancellation of a federal student loan if they could prove that they “had been misled into enrolling or remaining enrolled at an institution by false statements or false promises on key aspects of their program. This might have been related to job prospects, the admissions process, or transferring credits from previous schools they were enrolled in.

However, the class action lawsuit came after the Trump administration delayed or denied qualifying claims without cause, and because it was never settled, it continued into the Biden era once he took office in 2021.

This week’s decision approving the settlement proposed by the current White House (originally introduced in June) is being hailed as a “historic” decision, according to Forbes, as it is one of the most important agreements to today granting refunds and cancellations to student loan holders.

“This order finds that all class members, including our named plaintiffs, have correctly asserted real and concrete harm resulting from the Secretary’s decision [DeVos] alleged unlawful treatment of their borrower defense claims,” Alsup said of his decision. “The injury is twofold. The undue delay and suspension of the processing of debt relief requests by the secretary directly resulted in specific economic harm to each member of the group. Illegal delay of debt relief leads to obvious monetary damage.

Under the latter provision, anyone who filed a Borrower Defense Claim before June 22 this year and attended one of the 12 institutions deemed fraudulent by the government will receive the money.

Additionally, an additional 64,000 applicants who have not attended the 12 culpable institutions but have a strong case filed will have their documents reviewed and approved or denied on a rolling basis with strict deadlines; if the government does not meet these key dates, the borrower will also receive loan relief or full repayment.

An advocacy group, Project on Predatory Student Lending, states on its website: “Within one year of the effective date of the settlement agreement, these class members will have their outstanding loans relating to these schools fully discharged and will receive refunds of any amounts they previously had. paid the federal government for these loans. They also note that affected borrowers will see repairs to any damaged credit reports due to program barriers.

Take our poll : Do you think student loan debt should be forgiven?

This week’s settlement approval does not affect President Biden’s 2022 program to provide student loan relief to up to 45 million Americans through one-time payments of $10,000 (20,000 $ for Pell grant holders). However, it is hoped that the latest court ruling in favor of the borrowers could influence the final program that will eventually be approved.

More from GOBankingRates

This article originally appeared on GOBankingRates.com: Student loans: lawsuit in 2019 for forgiveness settled and 6 billion dollars granted

About Kimberly Alley

Check Also

NC man pleads guilty to COVID-19 loan fraud

GREENVILLE, NC (WNCN) — A Cary man has pleaded guilty to a multi-million dollar fraud …