Thousands of borrowers are likely to have their federal student loan debt erased after an agreement was reached Wednesday as part of a proposed class-action settlement.
As part of the proposed settlement, the Biden administration has agreed to discharge the federal student loan debt for roughly 200,000 borrowers. According to Politico, which first reported the settlement, the borrowers claimed they were defrauded by their college and their applications for relief from the Department of Education were delayed for years.
Borrowers in the suit accused both the Trump administration and the current administration of not taking action on their applications for “borrower defense” relief for years, Politico reports. The Education Department can discharge some or all of a borrower’s federal student loans if their school misled them or engaged in misconduct.
The agreement could result in more than $6 billion in student debt being wiped out.
It still needs to be approved by a judge before the approximately 264,000 members within the suit, who have already filed borrower defense claims, can receive debt relief. Of those members, about 200,000 attended certain schools that the Education Department believes may have engaged in misconduct, a release from Harvard Law School’s Project on Predatory Student Lending explains.
The Project, which brought the lawsuit, said these borrowers will receive “full discharge of their loans, refund of amounts paid, and credit repair.” The other 64,000 members attended schools that haven’t been identified as participating in misconduct. These individuals will have their claims decided on by the Education Department.
Calling the action a “momentous proposed settlement,” Eileen Connor, director of the Project on Predator Student Lending, said in a release. “It will not only help secure billions of dollars in debt cancellation for defrauded students, but charts a borrower defense process that is fair, just, and efficient for future borrowers.”
“We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties,” Secretary of Education Miguel Cardona said in a statement released late Wednesday night.
Debt relief has already been approved for thousands of borrowers
Thousands received $6.8 billion in debt cancellation “through improvements to PSLF,” according to the Education Department. The Public Service Loan Forgiveness program, or PSLF, is intended to provide debt relief to employees working with nonprofit and government agencies after they make the necessary amount of payments. Over 400,000 borrowers have received more than $8.5 billion in debt forgiveness through total and permanent disability discharge. Another roughly 690,000 borrowers have had a total of $7.9 billion in student loans canceled through discharges due to borrower defense and school closures.
Most recently, the Education Department announced the discharge of roughly $5.8 billion in loans for 560,000 borrowers of the former Corinthian Colleges. The school faced multiple investigations and was accused of defrauding students out of millions in federally backed loans.
Will Biden issue widespread forgiveness?
While on the campaign trail, President Biden supported student loan forgiveness. In April, he confirmed he was considering some sort of widespread federal student debt cancellation. Now, two months later, is student loan forgiveness still on the table?
The answer is, yes, Biden is still considering debt relief. When he was asked by reporters while walking on a Delaware beach Monday if he was close to a decision on student loan forgiveness, Biden said, “Yes,” according to CNN.
Payments on federal student loans remain paused until Aug. 31. Biden could approve another extension on the payment moratorium in light of rising interest rates, and depending on the state of the economy in August, according to the Associated Press.