Borrowers are starting to receive notices approving them for student loan forgiveness under a long-awaited settlement agreement.
While student loan news has been dominated this week by the Supreme Court hearing that will determine the fate of President Joe Biden’s one-time student debt relief plan, a lesser-known, parallel court battle has been playing out over another dispute involving student loan forgiveness. And that dispute was just resolved in favor of borrowers.
Here’s what you need to know.
Court Allows $6 Billion In Student Loan Forgiveness And Debt Relief Under Sweet vs. Cardona Settlement To Proceed
Last week, a federal district court in California rejected a challenge to a settlement agreement to conclude Sweet vs. Cardona, a long-running class action lawsuit brought by borrowers to resolve stalled or rejected Borrower Defense to Repayment applications. The Borrower Defense program allows borrowers to request student loan discharges and other debt relief if their school misled them or engaged in other illegal conduct to convince them to enroll or remain enrolled in the institution. The borrowers alleged that the Education Department had delayed processing thousands of Borrower Defense applications for years, and then issued arbitrary blanket denials.
In November, a federal judge had approved the landmark settlement agreement that would provide $6 billion in federal student loan forgiveness for over 200,000 borrower class members. The class members must have submitted Borrower Defense applications to the Education Department before June 22, 2022, and also must have attended one of the several dozen schools listed in an exhibit appended to the settlement agreement. Some borrowers could also receive other debt relief, including refunded payments and improvements to associated credit reporting.
But before the Education Department could begin implementing the relief, three schools referenced in the settlement agreement appendix sought to intervene in the case and stop the settlement relief from being disbursed to borrowers. The schools claimed that the settlement agreement was unfair and would negatively impact their reputations because of the “stigma” associated with the case and the nature of the borrowers’ allegations.
Judge William Alsup rejected these arguments in his decision, writing that, “Resolution of a lawsuit concerning monumental delay should not be delayed any longer by three intervenor schools who were not parties to the settlement agreement and who were not in the long, hard-fought litigation that preceded it.” The three schools will be allowed to continue their appeal to the 9th Circuit Court of Appeals, but Judge Alsup allowed the Education Department to begin implementing the settlement agreement relief immediately.
Education Department Begins Notifying Borrowers Of Approval For Student Loan Forgiveness
This week, the Education Department began notifying Sweet vs. Cardona class members that they qualify for student loan forgiveness and other relief.
“You are receiving this letter because you are a member of the class of federal student loan borrowers covered by the recent settlement of the Sweet v. Cardona (“Sweet“) lawsuit,” reads the email. “You submitted a Borrower Defense to Repayment discharge application relating to your federal student loan(s) on or before June 22, 2022, and you attended a school listed on Exhibit C (“School”) of the settlement agreement.”
The email goes on to say, “Pursuant to the Sweet settlement, the Department of Education will do the following:
- discharge your federal student loan(s) taken out for your enrollment” in the relevant institution;
- “provide a refund for any payments made to the Department of Education on your Relevant Federal Student Loan(s), including Relevant Federal Student Loan debt that you previously paid off; and
- delete the credit report tradeline associated with the discharged loan(s).”
Other than verifying contact information, covered borrowers are not required to take any further action, according to the notice.
Notably, the notice does not provide a specific timeline for when a borrower can expect to receive student loan forgiveness or other debt relief. However, implementation is expected to be on a rolling basis over a one-year period.
Where Borrowers Can Get More Information On The Sweet vs. Cardona Settlement
The notice tells borrowers, “If you have questions about this notice, please call our borrower defense hotline at 1-855-279-6207 from 8:00-8:00 ET on Monday-Friday or from 11:00-5:00 ET on Saturday or Sunday.”
The Project on Predatory Student Lending — the organization representing the class of borrowers in the Sweet vs. Cardona case — has also established a detailed informational website where borrowers can get more information and review Frequently Asked Questions.