As part of the settlement, the Department of Education identified 153 institutions — many of which are non-profit colleges — with evidence of “material wrongdoing… whether credibly alleged or, in some cases, proved.” Anyone who attended these schools and has applied for debt relief is eligible for full loan forgiveness under the agreement.
US District Judge William Alsup of The Northern District of California gave objecting colleges a chance to comment, but eventually finalized the settlement and endorsed the Department of Education’s approach.
“The Borrower Defense Program enacted by Congress has turned into an impossible quagmire,” Alsup wrote in its 25-page statement Wednesday. “The Secretary has devised a process to resolve the enormous backlog of claims, and he has done so under the express authorization of Congress.”
In addition to automatic relief, the agreement provides for refunds of funds paid to the Department of Education and restoration of creditworthiness for hundreds of thousands of eligible borrowers. A separate group of around 64,000 borrowers who have attended schools not on the department’s list will also receive decisions on their applications on rolling deadlines.
The agreement also protects borrowers who filed a claim after June 22 but before the judge’s conclusion the settlement, their claims will be decided within three years. According to data from Wednesday, this group of borrowers has now reached around 179,000 people.
“People are just over the moon,” said Eileen Connor, director of the Project on Predatory Student Lending, a group representing borrowers. “I am confident that this is a way forward for people and the Department of Education to move forward and have a process that works.”
Jason Altmire, president and chief executive officer of Career Education Colleges and Universities, a lobby group for for-profit colleges, expressed disappointment with the ruling and pledged an appeal.
“The settlement represents an unlawful transgression by the Department of Education and unfairly defames over 150 institutions with no opportunity to respond,” Altmire said. “We expect the Ninth Circuit Court of Appeals to recognize these serious shortcomings and return the parties to the negotiating table.”
None of the four schools that intervened in the case immediately responded to requests for comment or confirmation of whether they would appeal.
Alsup’s decision will bring relief to many people who are awaiting decisions on their defense claims from borrowers, some for up to seven years.
The collapse of for-profit chains Corinthian Colleges in 2015 and ITT Technical Institutes in 2016 — which spent their final days battling state and federal fraud allegations — led to a spate of lawsuits at the Department of Education. Former Secretary of Education Betsy DeVos refused to take action on claims after taking office, saying the Trump administration needs time to review the process created under President Barack Obama.
Applications piled up before DeVos decided to grant partial debt relief, prompting a lawsuit from former Corinthian students. DeVos said the case brought the system down. However, the borrowers argued that this did not affect their claims and took legal action.
In 2020, the Trump administration agreed to work through the backlog of claims within 18 months as part of an earlier settlement. Alsup rejected the deal months later after the Department of Education announced its widespread rejection of student debt relief applications.