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The Supreme Court last week declined to block a class-action lawsuit brought by student loan borrowers who say they’ve been defrauded by their schools. Now, the U.S. Department of Education will be able to continue delivering on a $6 billion loan forgiveness settlement.
More than 150 schools, mostly for-profit institutions, were involved in the settlement.
Three of those institutions — Lincoln Educational Services Corp., American National University and Everglades College Inc. — had petitioned the highest court. They’ve argued that they were denied due process with the settlement and that it harms their reputation.
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Consumer advocates applauded the justices’ decision.
“Today’s swift and decisive action from the highest court should end, once and for all, any ongoing debate about the legitimacy of this settlement,” said Eileen Connor, president and director of the Project on Predatory Student Lending.
Career Education Colleges and Universities, a trade association representing for-profit colleges, did not immediately respond to a request for comment.
Here’s what borrowers need to know about the settlement.
Starting around 2015, the U.S. Department of Education was flooded with requests for loan forgiveness from students who said their school had misled them. The government has the authority to cancel federal student loan debt when a borrower’s school is found to have engaged in misconduct.
A large backlog of applications led a group of borrowers to file a class-action lawsuit against the Department in 2019, demanding speedier relief.
The litigation played out over years, with the Trump administration at one point issuing notices denying the requested relief to some 128,000 borrowers.
By June 2022, however, borrowers and the government reached a settlement. Under its terms, tens of thousands of borrowers were entitled to debt relief. These students attended one of 151 schools accused of misconduct.
The government also agreed to consider and make a decision on the applications of thousands of other borrowers within a set timeframe.
The justices’ decision last week means that settlement will now stay in effect.
In the settlement, you can find a list of the schools involved under “Exhibit C.” The Project on Predatory Lending also has a list of all included institutions, which are mostly for-profit institutions.
If a borrower attended one of these colleges and applied for a borrower defense loan discharge on or before June 22, 2022, they should be entitled to automatic relief, said higher education expert Mark Kantrowitz.
Even if their application was previously denied, Kantrowitz added, they should now qualify.
Borrowers eligible for automatic relief will likely get the cancellation no later than Jan. 28, 2024.
In addition to the debt wiped from their record, some borrowers may see some cash as part of the agreement.
“This will include a refund of all payments previously made,” Kantrowitz said.
Other borrowers who attended schools not on that list but who’ve filed a borrower defense application should benefit from a streamlined and quicker review of their request as part of the settlement.