Who Qualifies For Student Loan Forgiveness Under Settlement With Education Department

WASHINGTON, DC March 3, 2023: US President Joe Biden during a meeting in the Oval Office of the … [+] White House on Friday, March 3, 2023. (Photo by Demetrius Freeman/The Washington Post via Getty Images)

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Last week, the Biden administration began notifying borrowers that they qualify for student loan forgiveness and other debt relief after a federal court allowed a landmark settlement agreement to proceed.

Here’s who qualifies, and what borrowers should know.

Billions In Student Loan Forgiveness And Debt Relief To Be Implemented Under Department Of Education Settlement

A federal district court in California rejected a challenge to a settlement agreement to conclude the Sweet vs. Cardona case last February. The case, a class action lawsuit alleging that the Education Department had illegally stalled or rejected hundreds of thousands of Borrower Defense to Repayment applications, spanned two administrations. The Borrower Defense program can provide student loan forgiveness and related debt relief for borrowers who were defrauded by their schools, such as through misrepresentations about admissions standards or career outcomes.

The settlement agreement, which would provide $6 billion in student loan cancellation as well as credit repair and payment refunds to over 200,000 borrowers, had been approved last fall. Implementation was set to begin in January.

But before the Education Department could proceed, several schools listed as eligible institutions in the settlement agreement appendix sought to intervene in the case and halt the settlement relief, claiming both the agreement and the process of getting to a resolution was unfair and would harm their reputations. The court rejected these arguments in a decision last month, allowing the settlement relief to begin.

‘Automatic Discharge Group’ Qualifies for Student Loan Forgiveness Under Settlement Agreement

Members of the Sweet v. Cardona class are now set to receive potentially significant student loan relief. To be a member of the class, borrowers must have submitted a Borrower Defense to Repayment application to the Education Department by June 22, 2022 and must have attended one of the dozens of institutions on the settlement agreement’s approved list of schools.

These borrowers will receive automatic student loan forgiveness for their applicable federal student loans, as well as refunds of past payments and credit repair for negative credit reporting associated with relevant delinquent accounts. The Education Department will issue the relief on a rolling basis over a one-year period.

Notably, settlement relief for borrowers who attended one of the three intervenor schools that challenged the agreement is still on hold while those schools appeal to a higher federal court. The three schools are Lincoln Educational Services Corp., American National University, and Everglades College.

Other Class Members Could Receive Student Loan Forgiveness Under Settlement

Those who submitted a Borrower Defense application prior to June 22, 2022, but did not attend one of the schools on the list, could still receive relief under the settlement. However, relief is is not guaranteed.

These class members, which together comprise the “decision group,” will receive an individual decision on their eligibility for settlement relief in accordance with the below timeline, as outlined by the Project on Predatory Student Lending, the organization representing the class of student loan borrowers:

For Borrower Defense applications submitted on or before December 31, 2017, within six months of the effective date of the settlement agreement;
For applications submitted from January 1, 2018, to December 31, 2018, within 12 months of the effective date;
For applications submitted from January 1, 2019, to December 31, 2019, within 18 months of the effective date;
For applications submitted from January 1, 2020, to December 31, 2020, within 24 months of the effective date; and
For applications submitted from January 1, 2021, through June 22, 2022, within 30 months of the effective date.

Post-Class Applicants Could Receive Student Loan Forgiveness Under Settlement

Those who submitted a Borrower Defense to Repayment application after June 22, 2022, but before the Sweet v. Cardona settlement agreement was approved by the court on November 16, 2022, are considered “post-class applicants.” These borrowers are not entitled to automatic relief under the settlement agreement, regardless of the school that they attended.

“Under the settlement, Post-Class Applicants will receive decisions on their applications within 36 months” of the settlement agreement’s effective date, according to the Project on Predatory Student Lending. “If the Department fails to provide any Post-Class Applicants with a decision during that time period, then they will receive Full Settlement Relief” — effectively converting them into a member of the “automatic discharge group” and entitling them to student loan forgiveness and other associated debt relief.

Borrowers Not Covered By Settlement Can Still Apply For Student Loan Forgiveness

Borrowers who are neither class members nor post-class applicants are not covered by the Sweet v. Cardona settlement. However, any borrower can submit a Borrower Defense to Repayment application if they were misled or otherwise defrauded by the school.

Borrowers can review the Borrower Defense application via the Education Department’s online portal. The Education Department has also recently published detailed guidance outlining the types of school misconduct that can give rise to a Borrower Defense claim, and providing helpful tips for strengthening a borrower’s application to increase the likelihood of approval.

This July, new federal regulations will go into effect. These new rules will expand the category of school misconduct that can qualify a borrower for relief under the Borrower Defense program, and will make it easier for the Education Department to process group discharges.