Appeals Court Allows Remaining Student Loan Forgiveness To Proceed Under Landmark Settlement After Pause

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A federal appeals court has issued a ruling that clears the way for the Biden administration to implement student loan forgiveness and other debt relief under a landmark settlement to resolve stalled Borrower Defense to Repayment claims.

Here’s the latest.

$6 Billion Student Loan Forgiveness For Over 200,000 Borrowers In Sweeping Settlement With Biden Administration

A federal district court ruled in February that settlement relief to resolve Sweet vs. Cardona could proceed. The class action lawsuit had pitted thousands of student loan borrowers against the Education Department for several years. The class of borrowers alleged that department officials had illegally delayed or arbitrarily rejected hundreds of thousands of Borrower Defense to Repayment applications, blocking borrowers from receiving student loan forgiveness that they were entitled to. The Borrower Defense program can provide federal student loan discharges and other forms of debt relief for borrowers who misled by their school through false promises or misrepresentations about key aspects of their program.

The settlement agreement approved last fall would provide $6 billion in student loan discharges to nearly a quarter million borrowers who attended one of several dozen institutions (mostly for-profit schools) listed in the agreement. Some borrowers would also be eligible for other relief, such as payment refunds and updated credit reporting.

The Education Department was set to start implementing the settlement relief in January. But three schools listed in the settlement agreement appendix sought to intervene in the case and block the relief. The schools — American National University, Everglades College, Inc., and Lincoln Educational Services — argued that both the agreement itself, and the process to get to a resolution, were unfair. They also argued that being listed in the settlement agreement was damaging to their reputations.

A federal district court judge rejected these arguments, but the three schools appealed to the Ninth Circuit Court of Appeals. Under a temporary order, the Education Department could proceed in implementing student loan forgiveness and other settlement relief for most covered borrowers, but had to pause relief for borrowers who had attended those three institutions while their appeal went forward.

Federal Appeals Court Allows Student Debt Relief Under Sweet v. Cardona Settlement To Proceed For All Covered Borrowers

Last week, the Ninth Circuit Court of Appeals rejected the challengers’ request for a stay pending the appeal, finding that the challengers “fail to demonstrate a sufficient probability of irreparable harm to warrant a stay of the challenged settlement pending these appeals.” This effectively allows all settlement relief under the Sweet v. Cardona settlement to move forward while the challengers’ appeal proceeds.

“On March 29, 2023, the Ninth Circuit Court of Appeals denied the intervenor entities’ motion for a stay pending appeal,” said the Project on Predatory Student Lending, the organization representing the class of student loan borrowers, in an update on its website. “This means that settlement relief for those who attended the three intervening schools – American National University, Everglades College/Keiser University, and Lincoln Tech – can proceed. At this time, the Department of Education can move forward with relief for all class members. ”

Who Qualifies For Student Loan Forgiveness Under Settlement

With full implementation of the Sweet v. Cardona settlement relief now proceeding, covered borrowers can expect relief on a rolling basis. Class members — which are borrowers who submitted a Borrower Defense to Repayment application to the Education Department by June 22, 2022, and attended one of the schools referenced in the settlement agreement’s approved list, will receive automatic student loan forgiveness and other associated debt relief over the course of the next year.

Borrowers who applied for Borrower Defense relief before June 22, 2022, but did not attend one of the listed schools, are considered part of a “decision group.” These borrowers will receive an individual “streamlined” decision within two years, depending on when they submitted their application.

Borrowers who submitted an application for Borrower Defense relief after June 22, 2022, but before the Sweet v. Cardona settlement agreement was approved by the court on November 16, 2022, are considered “post-class applicants” under the settlement agreement. These borrowers are not entitled to automatic relief, but should receive a decision on their applications within 36 months; if they don’ they would be entitled to “full settlement relief.”

To learn more about who qualifies for student loan forgiveness and other relief under the Sweet v. Cardona settlement, the Project and Predatory Student Lending has set up a detailed informational website.

Importantly, the Sweet v. Cardona settlement is entirely distinct from the ongoing legal battle over Biden’s separate one-time student loan forgiveness initiative. That plan is before the Supreme Court, and a decision is expected this summer.

Further Student Loan Forgiveness Reading

453,000 Borrowers Approved For Student Loan Forgiveness Under Waiver As Processing Continues

Republican Effort To Repeal Biden’s Student Loan Forgiveness Plan Gains Steam

What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?

Student Loan Forgiveness: Whether Biden Extends Payment Pause Again May Depend On Supreme Court Ruling

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