Judge Alsup Demands Accountability from Department of Education and Servicers on Borrower Defense Settlement
Court criticizes slow progress and issues with ED and its servicers at the second of three status hearings on the overdue relief in the $6 billion borrower defense settlement.
San Francisco – At a hearing today regarding the Plaintiffs’ motion to enforce implementation of settlement relief in the lawsuit Sweet v. Cardona, Judge William Alsup expressed frustration with ongoing issues and demanded accountability from the Department of Education and its servicers after their gross mishandling of settlement relief in the $6 billion borrower defense settlement.
Today’s hearing was the second of three status hearings that Judge Alsup ordered last month as part of a strict schedule of accountability measures to ensure that the overdue relief is delivered as soon as possible. The first hearing was on May 23 and the third will be held on July 11.
The hearing revealed:
Of the 5,500 class members who were due to receive full settlement relief by May 31, hundreds are still reporting issues and say that they have not received full relief.
Cooperation from servicers continues to be an obstacle to settlement implementation.
As of June 7, MOHELA had not responded to more than 80% of requests from the ombudsman’s office.
As of June 7, NELNET had not responded to more than 60% of requests from the ombudsman’s office and the responses they had transmitted were insufficiently specific.
MOHELA and NELNET’s responses are taking nearly two weeks on average.
The court ordered both servicers to respond to all outstanding requests by June 23.
The ombudsman’s office requires additional staff and resources to process and resolve complaints.
The parties reported progress, however, on developing a plan for the Department to deliver relief in a simpler and faster manner. The Court approved a framework under which the Department will expedite the discharge and refund process for a large tranche of class members with consolidation loans, which the Department represented would lead to substantially all remaining discharges and most refunds being completed by August 31.
“We appreciate Judge Alsup’s efforts to hold the Department and its servicers accountable and look forward to more progress as we continue our biweekly meetings to ensure compliance with this legally binding settlement,” said Eileen Connor, President and Executive Director of the Project on Predatory Student Lending. "Our clients have already been waiting far too long for a resolution and the Department is out of time and excuses. It has a legal obligation to deliver full settlement relief to class members and we are going to make sure that every single one gets the relief they are owed.”
The hearing and motion to enforce came after the Department of Education failed in its obligation to comply with the settlement agreement. The Department had a year to deliver settlement relief to 196,000 borrowers who are entitled to discharges, refunds, and credit repair under the settlement, yet tens of thousands of borrowers still had not received their settlement relief by the deadline of January 28, 2024.
The Department’s missing the court-ordered deadline has caused hardship above and beyond what class members have already experienced.
Case Background:
Nearly 196,000 student borrowers were told by the Biden administration that their loans would be wiped away, their credit would be repaired, and money they had paid to the government on fraudulent loans would be returned. But as the settlement deadline passed on January 28, 2024, about a third of these borrowers still had not had their loans cancelled.
Borrowers filed a motion to enforce the settlement on March 19, 2024. A few weeks later, on April 10, 2024, they filed a reply brief detailing extensive failures, including how the Department did not perform oversight of student loan servicers, did not pay attention to its own data, and failed to monitor compliance. It states that the Department has offered only “easily avoidable errors, self-inflicted obstacles, meager excuses, and decisions that could most charitably be described as grossly negligent.”
The Department of Education has acknowledged that it breached the settlement agreement, but has refused to provide accurate updates or a timeline for when it will fulfill its legal obligation to class members. Borrowers are seeking court intervention to force the Department to comply.
Missing the court-ordered deadline has caused hardship above and beyond what class members have already experienced.
The borrowers are represented by the Project on Predatory Student Lending and Housing and Economic Rights Advocates (HERA).
For more information about Sweet v. Cardona and the settlement, visit our website.
About the Project on Predatory Student Lending
Established in 2012, the Project on Predatory Student Lending represents over a million former students of predatory for-profit colleges. Its mission is to use litigation to eliminate predatory practices in higher education, and to relieve current and future borrowers from fraudulent student loan debt. PPSL has won landmark cases to protect borrower rights, recover money owed, and cancel more than $22 billion in fraudulent debt. Its ongoing cases hold predatory colleges accountable and force the U.S. Department of Education to act on behalf of students and stop protecting this insidious industry.
About HERA
Housing and Economic Rights Advocates (HERA) is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. It provides free legal services, consumer workshops, training for professionals and community organizing support, creates innovative solutions and engages in policy work locally, statewide and nationally.
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