Court Ruling Concludes Long-Running Student Loan Forgiveness Case
The class-action lawsuit involving the erasure of debts for federal student loan borrowers has stretched across three presidential administrations. The lawsuit carried the names of three different education secretaries, from Sweet v. DeVos in 2019 to Sweet v. Cardona during the Biden administration, and now Sweet v. McMahon under the current Trump administration.
The lawsuit aimed to cancel the debts of almost half a million borrowers alleging fraud by their colleges. This extensive legal battle reached its conclusion after a recent court decision. Originally filed against the Trump administration, the lawsuit focused on borrower defense, a federal rule permitting borrowers to seek debt relief if schools misrepresented facts like job prospects or credit transferability.
Under Secretary Betsy DeVos, many claims remained unprocessed or wrongfully denied, leading advocates to sue the department. Eileen Connor, executive director of the Project on Predatory Student Lending, noted that the settlement impacted over 450,000 borrowers, improving their financial situations by over $23 billion. This settlement marks the largest ever against the U.S. government.
Timeline and Settlement
In 2022, the Biden administration agreed to a settlement, promising that borrowers from a list of over 150 mostly for-profit colleges would receive full relief. Additionally, more than 250,000 borrowers could apply for relief. The Department was to review these claims promptly, or the loans would be discharged automatically.
The new administration processed only 60,000 applications by the deadline, and in a July 17 ruling, the U.S. Court of Appeals for the Ninth Circuit stated the department waited too long to voice any objections. Ellen Keast, an Education Department spokesperson, mentioned the deadline was ‘unrealistic.’ She added the department believed the court erred in not granting more time.
Personal Stories of Struggle
Jessica Feindt, a borrower from Flint, Michigan, pursued a degree in psychology from the University of Phoenix. She incurred significant debt due to misleading information about the transferability and acceptance of her degree into Michigan graduate programs, leading her to file a borrower defense claim in 2022.
In recent court documents, the Department disclosed providing $12 billion in loan discharges and refunds to about 300,000 borrowers since the 2022 settlement. With the ruling in July, that amount is expected to rise.
After logging into her federal loan account, Feindt found her debts erased following recent legal developments. Despite this, she expressed anger over the prolonged financial suffering her family endured.
Connor compares the lawsuits over school fraud to historic settlements like those with Big Tobacco, emphasizing the detrimental nature of loans to predatory schools.