Government Cancels $6 Billion in Student Loans for More Than 200,000 Borrowers

The decision was the result of a class-action lawsuit filed in 2019

The U.S. Department of Education has agreed to cancel $6 billion in student loan debt, a decision that affects about 200,000 federal loan borrowers. The borrowers had filed a class-action lawsuit against the federal agency, saying that they were stuck paying off debt from schools that misled them.

Key Takeaways

  • The federal government has decided to forgive roughly $6 billion in student loan debt to settle a class-action lawsuit involving roughly 264,000 borrowers.
  • In the lawsuit, the borrowers alleged that they should have received forgiveness because their schools misled them. The settlement also includes refunds and credit repair.
  • The lawsuit was originally filed in 2019 against the Trump Administration and then Secretary of Education Betsy DeVos.

Biden Administration Settles Student Debt Class-Action Lawsuit

Sweet v. Cardona is a class-action lawsuit filed in 2019—it was originally Sweet v. DeVos before the former Secretary of Education Betsy DeVos was replaced by Miguel Cardona—on behalf of more than 264,000 student loan borrowers.

That list includes all federal loan borrowers who were denied discharge under the Borrower Defense to Repayment program between December 2019 and October 2020.

The program states that if a school misled a borrower or engaged in other misconduct that violated certain state laws, that borrower may be eligible for a full discharge of their student debt.

The plaintiff of the lawsuit developed a list of dozens of colleges and universities that have engaged in such misconduct, according to the federal agency, and were included in the lawsuit.

After three years, the Biden Administration has agreed to settle the lawsuit, providing about $6 billion in discharges for roughly 200,000 borrowers, plus refunds of amounts paid and credit repair for those who missed payments. Additionally, a second group made up of 64,000 borrowers will get decisions on their applications for discharge within rolling deadlines based on how long their applications have been pending.

All loans will remain in forbearance and out of collection status with no accrued interest until they've received the promised relief or they've received a final, appealable denial. If you submit an application for the Borrower Defense to Repayment program after the settlement date, June 22, 2022, you won't be part of the lawsuit, but you'll get a decision within 36 months based on the merits of your application. If you don't receive a decision by then, you'll receive automatic forgiveness.

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  1. The Project on Predatory Student Lending. "Landmark Borrower Defense Settlement to Cancel Over $6 Billion in Student Loans for 200,000 Borrowers."

  2. Federal Student Aid. "Borrower Defense Loan Discharge."

  3. Predatory Student Lending. "A Guide to the Proposed Sweet Settlement."