Settlement Will Cancel $6B of Unpaid Student Loans

The Department of Education yesterday announced a settlement in a lawsuit that will see the debts of 200,000 individuals forgiven, wiping out $6 billion in unpaid loans owed by individuals who had filed borrower defense claims that were left pending for years by previous administrations.

A copy of the settlement in the case of Sweet v. Cardona (originally filed as Sweet v. DeVos) can be accessed by clicking here.

“Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” Secretary of Education Miguel Cardona said in a statement announcing the settlement. “We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.”

Under the terms of the settlement, the 200,000 students — who attended more than 150 different for-profit colleges — will not only have their outstanding debts canceled, but will also receive refunds on any amounts that had been paid on their loans to the Department of Education.

The settlement does need to be approved by the judge hearing the case, and a hearing has been requested for next month for that purpose.

In 2019, the Project on Predatory Student Lending filed the lawsuit in question, alleging the Education Department was not promptly processing their borrower defense to repayment applications, which protects individuals who were defrauded by their schools and provides them with the opportunity to have their debts canceled. At the time, nearly 160,000 applications were pending, with some waiting years for word on their requests.

More than $2 billion of unpaid student loans have been canceled under the program since the Biden Administration took office 17 months ago.

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