Nearly 200,000 more US student loan borrowers are set to have their federal debt wiped out after a federal appeals court rejected the Trump administration’s bid to delay decisions on their Borrower Defense claims, reported CNBC.
The ruling brings the total number of borrowers who have received or are expected to receive debt relief under a $23 billion class-action settlement with the US Department of Education to about 450,000.
The borrowers alleged that their colleges misled them and that the government failed to provide timely relief under the Borrower Defense programme, which allows federal student loan borrowers defrauded by their schools to seek debt cancellation.
One borrower’s student debt increased to roughly $400,000 from $250,000 while she waited for the Education Department to decide on her Borrower Defense claim, said Eileen Connor, president and director of The Project on Predatory Student Lending (PPSL), the advocacy group that filed the lawsuit against the Trump administration in 2019.
Who can get relief under settlement?
Eligibility for the Sweet settlement depends on the school a borrower attended and when they submitted their Borrower Defense application, Connor told CNBC.
“It is not something one can newly qualify for today,” she said.
Borrowers who had a claim pending with the Education Department in November 2022 may be part of the settlement class. The relief also covers certain borrowers whose applications were denied between December 2019 and October 2020.
Borrowers can check when they submitted their Borrower Defense application through the Education Department’s website. The department also notifies borrowers who are eligible for relief.
The settlement applies only to federal student loans, said higher education expert Mark Kantrowitz.
“Private student loans do not qualify for Borrower Defense,” Kantrowitz said — though nearly two dozen states maintain a tuition recovery funds program if you attended a for-profit school that closed.
How much student debt will be forgiven?
The average federal student loan balance cleared under the settlement exceeded $48,000, Connor said.
“Individual amounts vary significantly, however, and many borrowers received substantially more or less,” she added.
Eligible borrowers may also qualify for refunds covering payments they previously made toward their student debt. The typical refund for borrowers who qualify is more than $15,000, Connor said.
When will borrowers receive relief?
The timing of the relief depends on the details of each borrower’s case and when they applied for loan forgiveness, Connor said.
Under the settlement terms, the Education Department’s latest deadline to clear the debt of an eligible borrower is June 15, 2027.
Borrowers are not required to make payments while they wait for their loan forgiveness.
