For-profit organizations oppose $6 billion student loan forgiveness plan to settle borrower defense case

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Diving brief:

  • Three for-profit institutions filed court documents this week opposing a proposed $6 billion settlement between the U.S. Department of Education and former students who allege the colleges they attended have misled.
  • Under the settlement agreement in the Sweet vs. Cardona case, the Ministry of Education automatically provide debt relief to approximately 200,000 borrowers who have filed a borrower’s defense to a claim against one of more than 150 colleges. The borrower’s defense rule allows defrauded students to obtain the cancellation of their loan.
  • Two for-profit college owners – Lincoln Educational Services Corp. and Everglades College – as well as the American National University filed motions on Wednesday intervene in the case. The colleges argue that the settlement would damage their reputations and violate current borrower defense regulations.

Overview of the dive:

A federal judge is due to review the settlement agreement in late July. If approved, it will automatically provide debt relief to hundreds of thousands of students who attended certain colleges and create a deadline for the Department of Education to consider 68,000 additional borrower defense applications.

The list of institutions whose borrower defense claims will receive automatic relief is largely made up of for-profit colleges, some of which are now closed.

American National University, Lincoln Educational Services Corp. and Everglades College are all on the list. American National is an online institution, Lincoln Education Services Corp. has campuses nationwide, and Everglades College institutions are located throughout Florida.

The institutions argue that current regulations prevent the Department of Education from granting applicants Borrower Defense Claims without first giving colleges an opportunity to respond to the allegations. They argue that the settlement circumvents this process, violating their regulatory protections.

American National University and Lincoln Educational Services Corp., which filed their petition together, also wrote that they were concerned the settlement would lead the Department of Education to collect money from listed institutions to cover costs. canceled loans.

Both institutions argued that it would be illegal for the Department of Education to seek repayment of canceled loans outside of the “existing regulatory framework”. However, they said the proposed settlement does not rule out this possibility.

Career Colleges and Universities, a group representing for-profit institutions, criticized the proposed regulations on Wednesday.

“The settlement proposed by the U.S. Department of Education would provide debt relief to hundreds of thousands of borrowers without providing a meaningful process to assess these borrower defense claims, and without giving all stakeholders a seat. at the table to ensure the outcome is fair and equitable for students, institutions and taxpayers,” CECU President Jason Altmire said in a statement.

The Predatory Student Loans Project represents student borrowers in the lawsuit. Eileen Connor, director of the group, said in a statement that the plaintiffs would respond to “baseless filings” from for-profit institutions.

“It is disappointing but not surprising that these companies are, as always, watching their bottom line at the expense of students who have suffered serious harm and have waited years for justice,” Connor said.

The student borrowers launched the class action lawsuit in 2019, alleging that the Trump administration’s Education Department was refusing to give them debt relief. The two sides approached a settlement in early 2020, but the deal fell apart when the Department for Education began issuing blanket denials of borrower defense claims.

The case continued under the Biden administration, which made targeted student loan forgiveness a priority.

Earlier this year, the Ministry of Education announced that it was automatically releasing $5.8 billion in federal loans for those who attended Corinthian Colleges, a closed for-profit chain. And the agency recently proposed new borrower defense regulations this would facilitate student debt relief.