Judge Grants Final Approval to Borrower Defense Settlement
November 18, 2022
A federal judge in California granted final approval on Wednesday to a settlement that will cancel billions of dollars in federal student loans for hundreds of thousands of borrowers who argue they were defrauded by their college.
The class action lawsuit, dubbed Sweet v. Cardona (previously Sweet v. DeVos), was first filed in 2019 by seven named plaintiffs on behalf of themselves and federal student loan borrowers with borrower defense claims, against the Department of Education (ED). The lawsuit sought for the Trump administration to issue decisions on a backlog of pending borrower defense claims.
In June this year, ED and the Project on Predatory Student Lending at the Legal Services Center at Harvard Law School, which co-represents the plaintiffs, reached a settlement. The settlement stipulates that ED will discharge more than $6 billion owed by approximately 200,000 borrowers who had pending claims against one of 151 institutions, which were mostly for-profit and where the agency determined there was some evidence of misconduct.
Judge William Alsup granted preliminary approval to the settlement and allowed for more time for institutions or other parties to file motions to intervene in August. And in his final decision on Wednesday, Alsup ruled that the Biden administration does have the power to discharge large amounts of federal student loan debt under the settlement. Additionally, Alsup writes that the settlement would help ED clear the backlog of about 443,000 borrower defense claims — which he writes would take ED more than 25 years to get through.