This article is reprinted by permission from NerdWallet. More than 200,000 federal student loan borrowers who were misled by their schools are in line for $6 billion worth of debt relief as a result of a preliminary settlement approved by court order on Aug. 4.
It’s a whopper of a settlement and a big win for borrowers. But these discharges are only the latest in a series of efforts by the Department of Education to clear application backlogs and grant relief to borrowers whose schools defrauded them. Borrower defense offers loan discharge to borrowers whose schools — mostly for-profit — misrepresented such things as graduation and employment rates, financial aid, or even school classroom resources. The program launched in 2015, but discharges slowed to a near-complete halt during the previous administration due to rules changes and inaction. The Biden administration has made those untouched borrower defense claims a priority, resulting in approximately $8 billion in discharges through the program since January 2021, federal data show. The $6 billion settlement is the result of a class action lawsuit, Sweet v. Cardona, and it bumps up the total amount of borrower defense discharges to more than $14 billion. Even before the Sweet v. Cardona settlement, federal data show that total federal student loan forgiveness under all programs had reached $26 billion and 1.5 million borrowers. This includes the $8 billion in borrower defense discharges, as well as:
$8 billion under the Public Service Loan Forgiveness program.
$9 billion to borrowers who are totally and permanently disabled.
$1 billion in closed school discharges.
Billions for borrowers at for-profit schools Since 2021, new reviews of claims have resulted in billions in discharges for millions of borrowers. That includes students who attended for-profit schools like DeVry University and the now-shuttered ITT Technical Institute. The department also started changing regulations, such as rescinding calculations for …