Many of the borrowers affected by the new agreement have been waiting years for the Department of Education to process their claims under a rule known as borrower defense to repayment. It allows borrowers who believe they were misled by their college, often over inflated job placement rates or the ability to transfer credits, to request federal student loan relief.
Seven of those borrowers filed a class action lawsuit in 2019 over the department’s handling of the claims. Under former Education Secretary Betsy DeVos, processing of the applications stalled. But the Biden administration has been chipping away at the backlog.
Another 64,000 borrowers who have already filed borrower defense claims may also be eligible for debt relief under the proposed settlement agreement and will get decisions on their applications within rolling deadlines, based on how long their application has been pending.
Both the plaintiffs and the Department of Education said they were pleased with the agreement.
“This momentous proposed settlement will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government,” said Eileen Connor, director of Harvard Law School’s Project on Predatory Student Lending, which represented the borrowers.
In a statement, Education Secretary Miguel Cardona said the relief “will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties.”
“Since one day, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” he added.
Targeted debt relief
The administration has also temporarily expanded eligibility for what’s known as the Public Service Loan Forgiveness program — which cancels remaining federal student loan debt after a government or nonprofit worker has made 10 years of qualifying payments. The expansion has led so far to the cancellation of $6.8 billion for more than 113,000 borrowers.
More than $8.5 billion has also been canceled automatically for more than 400,000 borrowers who are permanently disabled and were previously eligible for debt relief but had not applied.
Biden is considering broader student loan forgiveness
On the campaign trail, Biden said he would support $10,000 in forgiveness. White House officials have indicated that he is also looking at setting an income threshold so that high-earning borrowers would be excluded from the debt relief.