Student Borrowers Win Final Approval of Settlement to Cancel Over $6 Billion in Loans for 200,000 Borrowers
Department of Education to resolve all pending borrower defense claims under settlement agreement in Sweet v. Cardona
SAN FRANCISCO – Student borrowers today won final approval of a settlement with the US Department of Education in the class action lawsuit Sweet v. Cardona. The agreement, which received preliminary approval on August 4, 2022, states that the Department will cancel at least $6 billion in student loans for approximately 200,000 individuals with pending borrower defense applications. Over 60,000 additional borrower defense applicants will receive decisions on their applications in the coming months.
Sweet v. Cardona (previously Sweet v. DeVos) was filed in the United States District Court for the Northern District of California in 2019 by seven named plaintiffs, on behalf of themselves and all federal student loan borrowers whose borrower defense claims for loan cancellation were being ignored by the Department of Education. The plaintiff class includes approximately 264,000 class members who make up the current borrower defense backlog.
The borrowers are represented by the Project on Predatory Student Lending (PPSL) and Housing and Economic Rights Advocates (HERA).
Statement from Eileen Connor, President and Director of the Project on Predatory Student Lending:
“This is a life-changing and long-awaited win for our clients who have fought tirelessly in this case. It immediately delivers certainty and relief to borrowers who have been waiting years for a fair resolution of their borrower defense claims. Throughout this case, our clients exposed a fundamentally broken borrower defense system and the urgent need for reforms to hold predatory schools accountable. We are proud that this settlement with the Department of Education will help chart a more fair and accountable process for borrowers.”
Details of the settlement include:
The class consists of approximately 264,000 people who had a borrower defense application pending as of the date of the signed agreement, June 22, 2022.
The class is divided into two groups:
The first group consists of the approximately 200,000 borrower defense applicants who borrowed to attend certain schools. These schools are listed in an attachment to the settlement and can be viewed here. This group will automatically get “full settlement relief” — which includes full discharge of their loans, refund of amounts paid to the Department of Education, and credit repair.
The second group consists of the rest of the class, approximately 64,000 people who borrowed to attend schools that are not on the list. These class members will get decisions on their applications within rolling deadlines, based on how long their application has been pending. If the Department does not meet any of the deadlines included in the settlement agreement, the affected class member will automatically get full settlement relief.
The class includes all borrower defense applicants who previously received a form denial notice between December 2019 and October 2020. All form denials will be rescinded.
All class members’ loans will remain in forbearance/stopped collection status with zero interest until they receive either settlement relief or a final, appealable denial.
People who applied for borrower defense after the execution date of the settlement agreement (June 22, 2022) but before the date of final approval of the settlement (November 16, 2022) are not part of the class. However, as part of the settlement, the Department agrees that these people will get a decision on the merits of their application within 36 months of the final effective date of the settlement, and will receive full settlement relief if the Department fails to issue a decision in that time.
President Biden’s recent announcement of broad-based loan cancellation under the HEROES Act will not change class members’ entitlement to relief under the settlement, even if the HEROES Act cancellation would cover their entire loan balance. Likewise, recent court decisions concerning HEROES Act cancellation will not affect the distribution of relief under the settlement. Specifically:
Those in the automatic discharge group will receive cancellation of the entire balance of their relevant loans, along with a refund of amounts paid to the Department, according to the schedule set out in the settlement agreement.
Those in the decision group will receive a decision on their borrower defense application within the timelines set out in the agreement. If the application is approved, they will be entitled to full settlement relief.
Post-class applicants will receive a decision on their borrower defense application within 36 months of the final effective date of the agreement. If the application is approved, they will still be entitled to any borrower defense relief for which they are eligible under the applicable borrower defense regulations.
For more details on the settlement, visit the FAQ on 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 $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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