The Biden administration has agreed to cancel $ 6 billion in student loans for nearly 200,000 alumni who claim to have been cheated by their colleges, according to a proposed settlement in a Trump-era lawsuit.
The agreement, filed Wednesday in federal court in San Francisco, would automatically cancel federal student loans for students enrolled in one of more than 150 colleges and schools applying for loan waivers due to alleged misconduct.
Almost all schools are for-profit colleges. The list includes many chains that have shrunk in recent years, including DeVry University, the University of Phoenix and the ITT Technical Institute, as well as other chains that are still in operation.
Education Secretary Miguel Cardona said in a statement that the settlement would settle claims “in a fair and equitable manner for all parties.”
The deal is yet to be approved by a federal judge. The trial is set to begin on July 28.
If approved, it would be seen as a major step in the Biden administration’s efforts to clear the backlog of claims filed through the Borrower Protection Program, which would allow students to write off their federal debts if their schools made false advertising claims or misled them.
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The class-action lawsuit was originally filed by seven alumni, with President Donald Trump’s Secretary of Education, Betsy Divos, arguing that she deliberately stopped the debtor protection process, and she rewrote its terms. When the lawsuit was filed, no final decision was made on any of the claims for more than a year.
When the department under Divos began deciding claims months later, it issued tens of thousands of denials without any explanation. At the time, the judge overseeing the case fired Divos for “blistering pace.” Regarding rejections, she says the policy “keeps borrowers dry”.
According to court documents, tens of thousands of borrowers were still helpless when the Biden administration began negotiations on a settlement in 2021. The latest federal data shows that there are more than 100,000 pending claims for borrower protection.
According to the proposed settlement, anyone who attends a qualified school and applies for termination by Wednesday will have their federal student loans and interest fully forgiven. They will also get a refund for past payments on those loans.
About 68,000 plaintiffs who do not attend eligible schools receive a “systematic review” of their claims. Older claims will be reviewed in advance, but recent decisions will be made within 20 years.
All borrowers caught up in the confusion of DeVos’ denials will withdraw their denials and their claims will be deemed pending from the date of actual filing.
Project on Predatory Student Lending, which represented students in the suite, said the agreement would help create “fair, equitable and effective for future borrowers.”
“This important proposed solution provides answers and reassurance to borrowers who have long and worked tirelessly for a fair settlement of their borrower protection claims after they have been deceived by their schools and ignored or rejected by their government,” Eileen Connor said. Project.
Borrower protection claims are usually reviewed in person, but the Department of Education has decided to grant automatic termination in this case due to “general evidence of institutional misconduct” in the schools in question under the settlement.
At some schools, evidence of “significant misconduct” already exists, but according to the deal, others were included because of the high number of claims from their alumni.
The debt protection process was introduced by Congress in 1994, but was rarely used until the collapse of the Corinthian college chain in 2015. The for-profit organization has closed its campuses amid widespread outcomes of fraud, forcing thousands of students to apply for loan waivers.
This has led to the expansion of the Obama administration program and the formulation of clear rules. It has become a focal point for administrative efforts to crack down on for-profit colleges that lie or use high-pressure tactics to recruit students. Students in Corinthians and other chains said they had registered on the promise of getting high-paying jobs, but could not graduate with just a few job opportunities.
Earlier this month, the Biden administration agreed to cancel a federal student loan Anyone who attended a Corinthian school until the fall of the company two decades after its founding in 1995. The move would eliminate $ 5.8 billion in debt for more than 560,000 borrowers, the largest single discharge in Department of Education history.
The solution adds to the administration’s attempt to cancel student loans for specific groups of borrowers. It wiped out billions of extra dollars Debts from borrowers with serious disabilities as well as other former non-profit college students And those with jobs in the public service.
Biden also faced increasing pressure to pursue mass student loan waivers. The White House recently signaled it was considering a $ 10,000 cancellation, But no decision was made.
The Associated Press Education Team is supported by the Carnegie Corporation of New York. AP is solely responsible for the entire content.