Some to get college loan forgiveness after $6B settlement

Education Department can now discharge loans for those included in lawsuit

The Education Department has begun discharging the student loans of hundreds of thousands of borrowers who say they were defrauded by their colleges after a federal judge recently ruled that a $6 billion settlement could largely move forward.

The settlement resolves a class-action lawsuit filed in 2018 by people who accused the department of ignoring their applications for loan forgiveness through a federal program known as borrower defense to repayment.

It was first approved in November by U.S. District Judge William Alsup of the Northern District of California. But a group of institutions — Everglades College, American National University and Lincoln Educational Services, the parent company of Lincoln Technical Institutes — appealed the judgment, claiming it violated the law.

On Feb. 24, Alsup denied a motion to halt the full settlement but agreed to pause loan cancellation for seven days for applicants who attended the three schools to give the colleges a chance to seek a stay from the appellate court. That decision will affect fewer than 4,000 people tied to the settlement.

“Resolution of a lawsuit concerning monumental delay should not be delayed any longer by three intervenor schools who were not parties to the settlement agreement and who were not in the long, hard-fought litigation that preceded it,” Alsup wrote in his ruling.

A spokesperson for the Education Department said the agency is pleased Alsup gave it the green light to implement the settlement agreement.

Lincoln Educational Services and American National University did not immediately respond to requests for comment. A spokesman for Everglades College, the parent entity of Keiser University and Everglades University, said the school has asked the appellate court for a stay.

“Accountability and transparency require regulatory consistency, adherence to due process, and strict observance of the law that protects not only students and taxpayers, but also the institutions that serve them,” Everglades College wrote in a statement Thursday.

“We believe that any student with a valid [borrower defense] claim has the right to have it fairly evaluated. However, the settlement ignores the law and grants relief regardless of the evidence or the merits of a particular claim.”

The three schools are among 151 institutions — many of which are for-profit colleges — the Education Department said had engaged in “substantial misconduct.”

Former students of those schools who applied for debt relief are entitled to full loan forgiveness under the settlement.

In July, the three colleges objected to the terms of the settlement agreement, arguing the deal did not assess the validity of the borrowers’ claims and would damage their reputations.

They also claim the Education Department is violating federal procedures by circumventing its own rules for resolving borrower defense claims. In its statement, Everglades College argues the agreement is based on “vague and unsubstantiated allegations of misconduct which, to our knowledge, are not true.”

The agreement provides automatic relief, including refunds of money paid to the federal agency and credit repair, to some 200,000 people.