200,000 student-loan borrowers were just granted $6 billion in debt relief after a federal judge approved a settlement with Biden's Education Department

200,000 student-loan borrowers were just granted $6 billion in debt relief after a federal judge approved a settlement with Biden's Education Department
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  • A federal judge granted final approval of a settlement involving defrauded student-loan borrowers.
  • 200,000 borrowers are expected to get $6 billion in debt relief, and the department will review other pending claims.

Thousands of student-loan borrowers will soon be getting long-awaited debt relief.

On Wednesday, federal Judge William Alsup granted final approval of a lawsuit — Sweet v. Cardona — filed in 2019 by student-loan borrowers who accused the Education Department at the time of failing to process their borrower defense to repayment applications. These are forms borrowers can file if they believe they were defrauded by the school they attended. If the department approves their forms, they would qualify to have their student loans discharged.

The lawsuit was not resolved under former President Donald Trump's administration, and in June, President Joe Biden's Education Department agreed to a settlement that would give 200,000 student-loan borrowers $6 billion in relief. Alsup just signed off on that settlement after allowing some for-profit schools to intervene in the settlement who argued they didn't have the chance to respond to borrower defense claims, harming their reputations.

"This order finds all class members, including our named plaintiffs, have properly asserted a real and concrete injury arising from the Secretary's alleged unlawful handling of their borrower-defense claims," Alsup wrote in his opinion, referring to former Education Secretary under Trump, Betsy DeVos. "The injury is two-fold. The Secretary's improper delay and suspension of processing claims for debt relief has directly led to a specific economic injury to each class member. Unlawful delay of debt relief results in clear monetary harm."

The department identified 153 schools in the settlement that it found to have engaged in misconduct, and anyone who attended those schools will receive full and automatic relief. Additionally, 64,000 other borrowers who attended schools not included on the list will get decisions on their relief on rolling deadlines, based on how long their applications have been pending.


Alsup also wrote that borrowers who have filed borrower defense claims after June 22, when the settlement was finalized, will receive word of their application status within three years.

Eileen Connor, president and director of the Project on Predatory Student Lending — the organizations that represented the borrowers in the settlement — said in a Tuesday statement that it's "a life-changing and long-awaited win for our clients who have fought tirelessly in this case."

"It immediately delivers certainty and relief to borrowers who have been waiting years for a fair resolution of their borrower defense claims," she added. "Throughout this case, our clients exposed a fundamentally broken borrower defense system and the urgent need for reforms to hold predatory schools accountable."

Biden's announcement of up to $20,000 in student-loan forgiveness should not impact this settlement — impacted borrowers will still receive the relief they are entitled to, regardless of the outcome of the lawsuits that have blocked the president's debt relief so far.