A group of colleges is trying to overturn a $6 billion settlement between the Biden administration and student borrowers who say they were defrauded by their schools, claiming the deal violates the law.
The schools are among the 153 institutions – many of them for-profit colleges – that The Department of Education said it had engaged in “significant misconduct … whether credibly alleged or, in some cases, substantiated.” Former students of those schools who applied for debt forgiveness are entitled to full loan forgiveness under the settlement.
The judge gives final approval for a $6 billion student loan settlement
The agreement resolves a class-action lawsuit filed in 2018 by people who accused the department of ignoring their requests for loan forgiveness through a federal program known as the Borrower’s Defense to Repayment. It provides automatic relief, including refunds of money paid to the federal agency and credit repair, to about 200,000 people. Another group of about 64,000 borrowers, who attended schools not on the department’s list, are entitled to receive decisions on their applications for rolling deadlines.
The colleges that challenged the agreement contested the terms in July before the court approved it, saying the deal did not assess the validity of the borrowers’ claims and would damage their reputations. Adding to these arguments, the schools said in their latest proposal that the Department of Education is also violating federal procedures by circumventing its own rules for resolving borrower defense claims. They also say the department lacks the authority to grant widespread debt cancellation, an argument that has been raised in lawsuits seeking to overturn President Biden’s debt relief program.
“The department has undermined the rule of law, violated its own regulations, overstepped its legal authority, and denied due process to institutions like ours, which means we made a mistake,” Lincoln Educational Services wrote in a statement Tuesday. She said each former student’s claim should be individually assessed – and possibly denied.
A statement from Everglades College, the parent of Kaiser University and the University of Everglades, echoed these points. ANU did not immediately respond to requests for comment, as did the Department of Education.
“This appeal shows how desperate these schools are to deny justice to borrowers, and we will not stop fighting until students get the relief they deserve,” said Eileen Connor, director of the Predatory Student Lending Project, a group representing borrowers.
Connor said the court’s decision to agree to the settlement is “clear and unequivocal” and that she is confident the Ninth Circuit will agree that the claims made by the schools are unfounded.
US District Court Judge William Allsopp The Northern District of California, which agreed to the settlement in November, on Tuesday scheduled a January 26 conference call to discuss the proposal and schedule a hearing.