The Biden administration has agreed to cancel an estimated $6 billion in federal student loan debt for about 200,000 borrowers who have claimed they were defrauded by their college.
The proposed settlement, which must be approved by a federal judge in a hearing scheduled for July 28, was agreed to by a group of borrowers who sued the Education Department in 2019 during the Trump administration because they believed their fraud claims were being ignored by the department. The group waited years for their claims to be processed under a rule known as “borrower defense to repayment.” It allows borrowers who believe they were misled by their college, often over inflated job placement rates or the ability to transfer credits, to request federal student loan relief.
“We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties,” United States Secretary of Education Miguel Cardona said in a statement.
“Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process,” he added.
Eileen Connor, the director of the Project on Predatory Student Lending, which represented the plaintiffs, celebrated the good news on Thursday (June 23). “It will not only help secure billions of dollars in debt cancellation for defrauded students, but charts a borrower defense process that is fair, just, and efficient for future borrowers,” she said in a statement.
This settlement comes two weeks after the Biden administration made the move to forgive the debt of nearly 560,000 students who attended Corinthian Colleges. This amounted to $5.8 billion, making it the largest single action of student debt cancellation ever by the federal government.
According to CNN, nearly 43 million Americans have federal student loan debt.