$6 billion student loan settlement gets preliminary approval



A federal judge on Thursday granted preliminary approval for a $6 billion settlement between the Biden administration and student borrowers who say they were defrauded by their schools, despite objection from some for-profit colleges.

Several schools, including Lincoln Tech and Keizer University, filed motions last month to intervene and oppose the settlement, arguing that it failed to assess the validity of borrowers’ claims and would damage their reputations.

The schools are among 153 institutions – many of which are for-profit colleges – that the Department of Education identified as having evidence of “serious misconduct … whether credibly alleged or, in some cases, proven”. Former students of these schools who applied for debt relief are entitled to full loan forgiveness as part of the settlement.

U.S. District Judge William Alsup of The Northern California District is giving for-profit colleges that raised objections an opportunity to speak out, but ultimately moved the deal closer to finalization.

Borrowers involved in the deal will have until September 8 to object to the terms of the deal, which Alsup called a “grand slam, home run” for borrowers.

“This settlement … ignores arbitration and simply cancels the loan,” Alsup said at a hearing on Thursday. “From a class perspective, it’s definitely good business to get preliminary approval.”

If approved for good, the settlement would resolve a class action lawsuit filed in 2018 by people who accused the Department of Education of ignoring their loan forgiveness requests through a federal program known as the defense of the borrower to repayment.

The agreement will provide automatic relief, including reimbursement of monies paid to the federal agency and credit repair, to some 200,000 people. Another group of about 64,000 borrowers, who attended schools not on the department’s list, will receive decisions on their applications on rolling timelines.

“Given all the twists and turns of this case… we’re going to have to keep pressing it until the ink is dry on final approval,” said Eileen Connor, director of the Project on Predatory Student Lending, a group representing borrowers. “I’m suspicious of people trying to obstruct something that’s completely legal, completely right.”

At Thursday’s hearing, Connor’s colleagues at the project questioned why the intervening colleges had waited until now to show an interest in the case or their former students’ claims. Lawyers for the schools said they should be given the opportunity to defend themselves against the claims, as allowed by the Trump administration’s update to borrower defense rules.

“The parties’ proposed settlement has unfairly damaged the reputations of more than 150 schools, all without the basic procedural fairness to which these schools are entitled under the Department’s own regulations,” said Jason Altmire, Chairman. and CEO of Career Education Colleges and Universities. , a lobby group for for-profit colleges. “We are confident that the involvement of these schools in the case will ensure a fairer outcome for everyone involved.”

It’s unclear whether Alsup’s tentative decision on the intervention will have a material impact on the settlement. Although the judge offered the schools the opportunity to speak out, he questioned the harm caused to the institutions.

“You already got the money and spent it,” Alsup told the schools’ lawyers. “Unless the U.S. government compensates [case] against you, you have no money to lose.

In 2020, Alsup rejected an earlier settlement reached with the Trump administration in the case after the Department of Education revealed its widespread denials of requests to cancel student debt.


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