Borrower defense claims: Updates to the ongoing lawsuit

Separate from the broader debate surrounding student loan forgiveness, the U.S. Department of Education settled the Sweet v. Cardona lawsuit (now called Sweet vs. McMahon), forgiving about $6 billion in federal student loans for 200,000 borrowers.

The students, mostly from for-profit colleges, claimed their schools defrauded them under the Borrower Defense to Repayment rule. This settlement is one of several efforts to ensure accountability of schools that accept federal funding from students.

Biden administration agreed to cancel student debt for around 200,000 defrauded borrowers

The Department of Education filed a settlement agreement in the Sweet v. Cardona case on June 22, 2022 stating that the agency would fully discharge the federal student debt of approximately 200,000 defrauded students. The settlement became effective on Jan. 28, 2023.

The agreement came after students from 150 institutions — mostly for-profits — filed a lawsuit against the Department of Education regarding borrower defense to repayment. Under borrower defense, borrowers are eligible to have some or all of their federal student loans discharged if their school engaged in misconduct or defrauded them.

Among their claims, the plaintiffs stated that the department “unreasonably delayed and unlawfully withheld decisions on pending ‘borrower defense’ claims,” “issued unlawful notices denying certain borrower defense claims,” and “adopted unlawful policies governing the process of evaluating borrower defense claims.”

Borrowers in the suit have been granted forgiven student loans, as well as a refund on any payments made toward these debts. According to the Department of Education website, the final applicants for relief will have a decision no later than July 28, 2025. It remains unclear if the Department will continue to handle this amid restructuring from the current White House administration.

Relief comes years after the original lawsuit was filed against the Trump administration

The now Sweet v. McMahon case (formerly Sweet v. Cardona and Sweet v. DeVos) was filed in June 2019. The plaintiffs claimed the Department of Education had ignored their borrower defense applications. Borrowers then asked the court to turn the case into a class action lawsuit to represent themselves and all other borrowers in the same situation.

The motion included nearly 900 affidavits from students, which detailed the damages they’ve suffered thanks to the department’s lack of action. Ninety-six percent of the borrowers said they were worse off than before finishing school.

Shortly after, the department started sending out rejection letters to those who had applied for borrower defense without any further explanation. This, too, was included as part of the suit’s allegations.

Student loans under the Department of Education remains uncertain

Under the Biden administration, 5.3 million borrowers experienced loan forgiveness for a total of $188.8 billion. Though much has been accomplished, this is far short of the estimated $1.7 trillion in federal student loans sitting on the federal ledger.

The current Trump administration has mandated the restructuring of the Department of Education, including moving the entire student loan portfolio under the Small Business Administration. Additionally, there will be changes coming for those on income-driven repayment plans.

You can find frequently asked questions and more information on the Project on Predatory Student Lending website.

Discharged schools since Aug. 2023