Judge Grants Preliminary Approval of Borrower Defense Settlement in Sweet v. Cardona
SAN FRANCISCO – On Thursday, August 4, Judge William Alsup granted preliminary approval of the proposed joint settlement in the lawsuit Sweet v. Cardona. Upon final court approval, the settlement will immediately cancel at least $6 billion in federal student loans for approximately 200,000 individuals.
Statement from Eileen Connor, President and Director of the Project on Predatory Student Lending:
“Preliminary approval is an important milestone for this settlement and for our clients, bringing us one step closer to finally delivering certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims. When our clients brought this case in 2019, it was based on the fact that many of them had already been waiting years with no answers, and that harm has only compounded over time. As always, our focus is our clients, and we look forward to helping them finally secure the justice they are owed.”
The Department of Education will now begin sending notice of the settlement to class members. Class members will have until September 8, 2022 to file comments on the proposed settlement with the court. Details about the process to submit comments will be forthcoming.
Sweet v. Cardona Case Background:
Seven students brought this lawsuit against then-Secretary DeVos’ Department of Education in June 2019. At the time, the Department of Education had halted all processing of borrower defense claims and refused to adjudicate any borrower defense from any student for well over a year.
Immediately after filing the lawsuit, the students asked the court, in a motion for class certification, to let them represent all other borrowers whose borrower defense claims for loan cancellation had stalled. In October 2019, the court certified the class of over 200,000 borrowers with pending claims. Many had been pending for years.
After a proposed settlement agreement was filed in spring of 2020, the Department of Education sent out tens of thousands of blanket denials of borrower defense claims. Many of these form letters denied relief due to a “lack of evidence,” despite the extensive evidence submitted, even in cases where other government enforcement agencies had found fraud. After a historic hearing held on Zoom and attended by over 500 student borrowers in fall of 2020, the judge found the Department of Education was not acting in good faith by sending out blanket denials and rejected the proposed settlement.
The judge also ordered discovery, allowing lawyers for the student borrowers in this case to obtain documents and to depose officials at the Department of Education. A review of these documents and depositions revealed alarming evidence that the U.S. Department of Education created a sham process designed to deny borrowers debt relief regardless of evidence. In March 2021, student borrowers filed a supplemental complaint citing this new evidence.
In February 2022, the U.S. Court of Appeals for the Ninth Circuit overruled the district court’s order allowing the student borrowers to depose former Secretary DeVos.
On June 22, 2022, a joint proposed settlement was filed with the court. Two weeks before the scheduled hearing on preliminary approval, four institutions — Lincoln Educational Services Corporation , American National University, Everglades College, Inc., and The Chicago School of Professional Psychology — filed motions to intervene in this case to register their disagreement with the proposed settlement. Borrowers responded on July 25, 2022.
The court held a hearing on the settlement on August 4, 2022 where Judge Alsup granted preliminary approval of the proposed settlement.
The borrowers are represented by the Project on Predatory Student Lending and Housing and Economic Rights Advocates (HERA).
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 $10 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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