DeVos reaches settlement in lawsuit over student loan relief plan
The U.S. Education Department is promising to process student loan forgiveness claims for nearly 170,000 borrowers within 18 months as part of a proposed settlement announced Friday in a federal lawsuit.
The suit alleges that Education Secretary Betsy DeVos illegally stalled a program known as borrower defense to repayment, which promises to forgive federal student loans for borrowers who are cheated by their colleges. When the lawsuit was filed in June 2019, it had been a year since the department issued a final decision on any claim.
Most of the borrowers awaiting decisions attended for-profit colleges, and some borrowers have been waiting over four years.
Under the settlement, DeVos admits no wrongdoing but promises to issue decisions on all pending claims within 18 months, and to cancel debt for approved claims within 21 months. In court documents, the department said it had paused the program while officials crafted new regulations. The agency says it resumed processing claims in December.
In a statement released Friday, the Education Department called the proposed settlement “an important win for students and for taxpayers.”
The borrower defense program dates to the 1990s but was expanded under former President Barack Obama. The update was directed at thousands of students who attended for-profit colleges that collapsed amid accusations that they lied about the success of their graduates.
But DeVos suspended the 2016 rules when she took over the agency and last year issued new ones making it tougher for students to get loans cleared.
At the time, DeVos said the previous rules were overly generous and allowed too many students to get loans erased at the expense of taxpayers.
Under the settlement, the department says it will waive all loan interest that has accrued while students await a decision on their claims. If the agency fails to decide a claim within 18 months, officials must cancel 30% of debt for every month they’re overdue. And if the agency garnishes students’ wages or takes their tax refunds while they’re awaiting a decision, it must discharge 80% of the debt.
“This settlement is a very important step that will allow them to finally get a decision and move forward,” said Toby Merrill, director of the Project on Predatory Student Lending at Harvard University, which represented the plaintiffs.