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A federal judge early Wednesday approved a major class-action settlement intended to resolve allegations that the U.S. Department of Education stonewalled hundreds of thousands of applications for a student loan debt cancellation program that misled colleges.
US District Judge William Alsup The agreement was signed After taking a week To evaluate the final arguments In a three-year-old child sweet v. Cardona At issue is President Joe Biden’s sweeping initiative to provide up to $10,000 or $20,000 in federal student loan debt relief for about 40 million borrowers — a separate $430 billion student loan relief that could be provided through the Borrower Protection for Payment Program. It means motivation. Arrested in various court cases.
Allsup’s decision sets the stage for the Department of Education to automatically write off debt for nearly 200,000 borrowers. Studied at 151 collegesLarge for-profit chains closed, including still-operating institutions like ITT Technical Institute and Grand Canyon University. That would eliminate a total of nearly $6 billion in federal student loan debt.
The agreement requires the Department of Education to quickly protect the borrower and to cancel the debt of another 64,000 borrowers or to pay off their debt if they cannot reach a decision within a certain time frame, depending on how long they have been waiting to discharge their debt. A verdict. It is planned to approve a loan of 1.5 billion dollars.
Another part of the agreement calls for the department to soften borrower defense applications that apply to the program after the settlement agreement is reached. For about 179,000 borrowers, the Education Department will give them automatic relief if they don’t make a decision on their applications within three years of the settlement being approved.
“Not only is this settlement fair, reasonable and adequate, it is a great home run for the class,” Supp He wrote an order approving the agreement. “Initially, they prosecuted only to get a decision on their applications one way or another. Now, in most cases, they are getting full amnesty.”
Four institutions and college operators whose alumni are covered under the deal have objected: American National University, Chicago School of Professional Psychology, Everglades College and Lincoln Educational Services Corp. are among the 151 colleges whose alumni may receive a waiver. And they argued that their inclusion denied them due process and tarnished their reputation.
It is possible to appeal the judge’s approval Wednesday, according to a statement issued by a trade group representing for-profit colleges, vocational colleges and universities.
CECU President and CEO Jason Altmire said in a statement: “The four intervening schools make a compelling case that the sweet settlement represents an illegal crackdown by the Department of Education and unfairly disadvantaged more than 150 institutions.” “We expect the Ninth Circuit Court of Appeals to recognize these fatal flaws and return the parties to the bargaining table.”
Allsup responded with an injunction that overruled the colleges’ objections.
The agreement does not use standard loan protections for payment procedures, and the Department of Education therefore cannot use it as a starting point to try to recover loan discharge costs from the 151 institutions on the automatic debt relief list, he wrote. Institutions on the list will still have full due process rights if the Department of Education takes action against them in the future. And Allsup dismissed the idea that its inclusion on the list of 151 colleges is “an impermissible scarlet letter.”
“This order does not contain the necessary legal interpretation of the specification to deny final approval of the agreement,” he wrote.
The Hunter Student Loan Project, which represented the plaintiffs in the case, cheered the judge’s decision.
“In this case, our clients have exposed a fundamentally broken borrower protection system and the urgent need for reform to hold predatory schools accountable,” said Eileen Connor, president and director of the firm. he said in a statement.. “We are proud that this agreement with the Department of Education will help create a fairer and more accountable process for borrowers.”
Years of arguments to pay for the defense of the debtor
A winding road led to Wednesday’s verdict.
In 2019, borrowers They filed a lawsuit. Against the Department of Education, alleging the Trump administration is improperly delaying decisions on borrower defense claims. In the year They worked with the department to reach an agreement in 2020, but that agreement fell apart when they learned the agency would be sending out blanket requests for borrower protections.
It was almost two years later — after the Biden administration began — that the Education Department. A new settlement agreement has been reached with borrowers to provide automatic relief to most class members.
However, colleges that He opposed the plan They argued that the agreement sidesteps borrower protection rules, deprives them of due process rights and harms their reputation.
Attendance at one of the 151 listed colleges, the Department of Education said, “provides relief intended for the purposes of this settlement, with respect to serious misconduct at the listed schools, both honestly alleged and in some cases proven.”
An attorney for one institution, the nonprofit Chicago School of Professional Psychology, raised concerns that some students will have their debt canceled even if their colleges reach other settlements with financial relief.
Meanwhile, the Department argued that federal law gives it broad authority to waive, relinquish, or waive any right, title, claim, lien, or claim related to federal student loans. In court documents filed before the ruling, the department said it used that authority to clean up more than $11.4 billion in student loans for borrowers who attended many closed for-profit colleges.
A key question to be answered before the final approval is issued is if Education Secretary Miguel Cardona has the authority to enter the settlement, Allsup said. The judge found nothing unusual in the secretary’s exercise of discretion to discharge the student loan debt.
Allsup said officials have used the authority during various presidential administrations, including a $175 million payment in 2019 to students at DreamCenter Education Holdings’ colleges and announced $5.8 billion this year to 560,000 Corinthian college borrowers. He rejected other regulatory objections.
“The Secretary did not exceed legal authority or fail to follow agency regulations,” Allsup wrote.
Cardona had a practical problem, Alsup wrote. About 443,000 people have pending borrower protection applications, but the Department of Education has 33 claims adjudicators. Even if they each processed two claims a day and worked 52 weeks a year without a break, it would take more than 25 years to settle the claims individually.
“The approach taken here is group wise and within the plenary powers of the Secretary and Attorney General,” the judge wrote.
Education Department officials are pleased with the settlement approval. Cardona said in a statement.
“Going forward, the Department of Education will strengthen monitoring and enforcement against colleges that mislead students, and will work to continue the Biden-Harris administration’s commitment to helping students who have been harmed,” he said.