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Thousands of student-loan borrowers defrauded by schools they attended have been waiting for years to get relief. President Joe Biden's Justice Department has some reasons why the process has been so delayed.
In 2019, the Project on Predatory Student Lending — a group advocating for relief for defrauded student-loan borrowers — filed a lawsuit known as Sweet v. Cardona under former President Donald Trump, accusing his Education Department of stalling borrower defense claims, which are claims borrowers can file if they believe their school defrauded them. If approved, their debt would be canceled.
The lawsuit was not resolved under Trump, so Biden's Education Department took it on and agreed to a settlement in June 2022. A court officially approved the settlement on January 28, 2023, and it set January 28, 2024, as the deadline for nearly 200,000 borrowers to receive relief. However, that hasn't been the case.
The Justice Department wrote in a letter to the Project on Predatory Student Lending on February 16 that it "acknowledges that full settlement relief has not been implemented for all borrowers" in the settlement class. Instead, the relief to date is as follows, according to the department:
135,526, or 69%, of borrowers have received fully processed debt relief
31,437, or 16%, of borrowers have not received fully processed debt relief
And 28,964, or 15%, of borrowers "require further investigation" to confirm whether they have received fully processed relief.
This new data comes in response to a letter the Project on Predatory Student Lending sent to the Justice Department on February 2, accusing it of breaching the settlement agreement by failing to discharge all borrowers' loans by the stated deadline.
"Receiving settlement relief in a timely and predictable manner is a matter of urgency for Class Members," the letter said.
"Many of them have been counting on their discharges, refunds, and credit repair in order to take other important steps in their lives—such as paying for medical care, buying houses or cars, supporting their families, and going back to school," it continued. "The failure to receive this relief by the deadline is potentially devastating."
The Justice Department said that since it is still investigating the status of some of the borrowers' loans, it cannot determine if it breached the settlement terms. However, it offered three reasons as to why the relief has not yet reached all borrowers:
Some of the borrowers have "highly complex consolidation loan histories" that require manual research to determine their discharge or refund amounts
Some borrowers' payment histories aren't readily available, requiring servicers to reconstruct billing histories
And some of the discharges need to be processed across multiple servicers, which can also lead to "coding errors or random processing glitches."
It added that servicers have been instructed to prioritize the relief under this settlement, and the Education Department is "also evaluating its legal options with respect to the servicers" to ensure servicers are accurately reporting borrowers' loan statuses to credit bureaus, per the letter.
The Education Department is expected to release an updated timeline on relief in the coming days. It also said in a recent report that it "will continue to work on improving that process and on verifying the status of Class Members' relief."
"The Department is also committed to working with the servicers, the guaranty agencies, and plaintiffs' counsel so that reports to Class Members provide the data figures necessary to most accurately reflect the status of Class Members' relief," the report said.
