Federal Appeals Court Clears the Way for Implementation of Student Loan Forgiveness

A federal appeals court has recently issued a ruling that will allow the Biden administration to go ahead with its plan of student loan forgiveness and other debt relief. This comes as part of a landmark settlement that aims to resolve stalled Borrower Defense to Repayment claims.

Background of the Sweet v. Cardona Settlement

The Sweet vs. Cardona class action lawsuit was filed by thousands of student loan borrowers against the Education Department for delaying or rejecting their Borrower Defense to Repayment applications. The lawsuit alleged that hundreds of thousands of borrowers were entitled to student loan forgiveness, but were unable to receive it due to the department’s actions. Borrower Defense is a program that offers federal student loan discharges and other forms of debt relief to borrowers who were misled by their school through false promises or misrepresentations.

The Sweet v. Cardona settlement approved last year offered $6 billion in student loan discharges to almost a quarter million borrowers who attended one of several dozen institutions, mostly for-profit schools, listed in the agreement. This settlement relief also offered eligible borrowers other forms of relief, such as payment refunds and updated credit reporting.

Intervention by Three Schools

Although the Education Department was set to start implementing the settlement relief in January, three schools listed in the settlement agreement appendix attempted to intervene in the case and block the relief. These schools – American National University, Everglades College, Inc., and Lincoln Educational Services – argued that the agreement and the process to resolve it were unfair. They also claimed that being listed in the settlement agreement was damaging to their reputations. A federal district court judge rejected these arguments, but the three schools appealed to the Ninth Circuit Court of Appeals.

Recent Developments

Last week, the Ninth Circuit Court of Appeals denied the request of the three intervening schools for a stay of the challenged settlement pending their appeals. This means that settlement relief for those who attended these three institutions can now proceed, and the Education Department can move forward with relief for all class members.

Who Qualifies for Student Loan Forgiveness

With full implementation of the Sweet v. Cardona settlement relief now proceeding, covered borrowers can expect relief on a rolling basis. Class members, which are borrowers who submitted a Borrower Defense to Repayment application to the Education Department by June 22, 2022, and attended one of the schools referenced in the settlement agreement’s approved list, will receive automatic student loan forgiveness and other associated debt relief over the next year.

Borrowers who applied for Borrower Defense relief before June 22, 2022, but did not attend one of the listed schools, are considered part of a “decision group.” These borrowers will receive an individual “streamlined” decision within two years, depending on when they submitted their application.

Borrowers who submitted an application for Borrower Defense relief after June 22, 2022, but before the Sweet v. Cardona settlement agreement was approved by the court on November 16, 2022, are considered “post-class applicants.” These borrowers are not entitled to automatic relief but should receive a decision on their applications within 36 months. If they don’t, they would be entitled to “full settlement relief.”

The Sweet v. Cardona settlement is distinct from the ongoing legal battle over Biden’s separate one-time student loan forgiveness initiative. The Supreme Court is expected to make a decision on that plan this summer. The Project on Predatory Student Lending has set up a detailed informational website for those interested in learning more about who qualifies for student loan forgiveness and other relief under the Sweet v. Cardona settlement.