Dive Brief:
- A federal appeals court on Friday rejected the U.S. Department of Education’slatest request to delay its deadlinefor deciding tens of thousands of borrower defense cases.
- In 2022, the Education Department agreed to a settlement in a long-running class-action casebrought by students seeking decisions on their borrower defense applications, which can provide debt relief for students misled by their institutions.The agency agreed to provide either timely decisions on those claims or automatic relief.
- Under the Trump administration, Education Department officials have been pushing for an 18-month delay to complete all decisions for a tranche of more than 250,000 applications, with only about 60,000 completed by its original Jan. 28 deadline.However, the appeals court ruled that the agency failed to show that circumstances have shifted that warrant a change to the settlement agreement.
googletag.display(‘dfp-hybrid1-mobile’)); googletag.pubads().addEventListener(‘slotRenderEnded’, function (event) { var adUnitPath = ‘/3618/highereddive/highereddivehybrid1’; var onProformative = false; if (onProformative && event.slot.getAdUnitPath() === adUnitPath && !event.isEmpty ) { var adUnitPathWithVisibility = adUnitPath + ‘-mobile’; var selector = ‘.pf-comments__ad-wrapper #dfp-hybrid1-mobile’; if (!$(selector).closest(‘.pf-comments__ad-wrapper’).hasClass(‘borders’)) { $(selector).closest(‘.pf-comments__ad-wrapper’).addClass(‘borders’) } } }); } }); }); ]]>
googletag.display(‘dfp-hybrid2-desktop’)); googletag.pubads().addEventListener(‘slotRenderEnded’, function (event) { var adUnitPath = ‘/3618/highereddive/highereddivehybrid2’; var onProformative = false; if (onProformative && event.slot.getAdUnitPath() === adUnitPath && !event.isEmpty ) { var adUnitPathWithVisibility = adUnitPath + ‘-desktop’; var selector = ‘.pf-comments__ad-wrapper #dfp-hybrid2-desktop’; if (!$(selector).closest(‘.pf-comments__ad-wrapper’).hasClass(‘borders’)) { $(selector).closest(‘.pf-comments__ad-wrapper’).addClass(‘borders’) } } }); } }); }); ]]>
Dive Insight:
The decision is just the latest in the Sweet v. McMahon case, which was originally filed in 2019 under the first Trump administration. At the time, borrowers alleged that the Education Department was stonewalling their applications for borrower defense.
As of this April, the Education Department had discharged or refunded $12 billion for almost 300,000 borrowers under the settlement, the agency said in recent court documents.
The appeals court decision last week means that the Education Department must provide debt relief to over 170,000 borrowers, according to the Project on Predatory Student Lending, which is representing them.
“Once again, the courts have rejected the Department’s attempts to evade its obligations to borrowers who have waited far too long for the relief they are owed,” Eileen Connor, president and executive director of the group, said in a Friday statement.”Today’s decision brings us another step closer to fulfilling the settlement’s promise to every borrower.”
The Education Department did not provide comment by publication time Wednesday.
The 2022 settlement divided borrowers into three groups. The first — composed of roughly 200,000 borrowers —attended one of 151 colleges put on a list by the Education Department because they showed strong signs of misconduct.Those borrowers were granted automatic relief.
The second group of about 64,000 borrowers had applied for borrower defense but didn’t attend one of those colleges.The Education Department agreed in the 2022 settlement to provide decisions on their cases by certain dates or else provide automatic relief.
The final group included borrowers who filed their borrower defense applicationsin the roughly five-month period after the settlement was first announced but before it received final approval from the court. That group is composed of roughly 207,000 students, who were likewise promised timely decisions or automatic relief. They together filed over 251,000 claims.
Last November, the Education Department asked for an 18-month delay to make decisions on applications from the last group of students, saying it would not meet the Jan. 28 deadline for roughly 193,000 claims.
In response, the judge overseeing the case at the time — William Alsup — denied any delay on decisionsfor students in the last group who attended one of the 151 colleges named by the Education Department. They collectively had about 170,000 pending claims.
But he granted a roughly 2 and 1/2 month delay for other borrowers.
When Alsup retired last year and a new judge — Haywood Gilliam Jr. — inherited the case, theEducation Department urged the court to reconsider that decision. Gilliam rejected that request in February, and the department appealed to the9th U.S. Circuit Court of Appeals.
The Education Department argued that it couldn’t have anticipated how large the size of the third tranche of borrowers would be when it originally agreed to the settlement in 2022.The agency also raised issues with providing full discharges to borrowers who had consolidated loans ineligible for relief with loans that were.
However, in a seven-page decision Friday, the appeals court said the federal agency lacked evidence that it didn’t know about that issue when it first agreed to the settlement.
The three-judge panel also wrote that the Education Department knew when it moved for final approval of the settlement that the third group would include roughly 179,000 borrowers. And the agency knew the group included over 205,000 borrowers in early 2023.
Yet the Education Department didn’t contest the deadline for providing relief to this group until roughly three years later. “Thus, the record demonstrates that the DOE understood the implications of agreeing to the Settlement,” the appeals court wrote.