November 11, 2022
A federal judge said he will decide within a matter of days whether to allow the U.S. Department of Education to settle a class-action lawsuit, which would wipe away about $6 billion worth of student loans for around 200,000 borrowers who said their colleges misled them.
U.S. District Judge William Alsup heard arguments Wednesday from the Biden administration, as well as colleges opposing the proposed settlement.
“I need to study this a bit,” Alsup said during the hearing. “About a few days to a week, I will get an order out that will be in writing that will explain who wins and who loses.”
The agreement would end a lawsuit filed in 2019 that accused the Education Department of mishandling borrower defense to repayment claims, which allow borrowers defrauded by their colleges to have their federal student loan debts cleared. Plaintiffs said the department improperly delayed decisions on their claims and that the Trump administration unlawfully issued blanket denials.
The agreement would automatically clear federal student loan debts for those who filed a borrower defense claim against a college on a list of 150-plus schools.
The department said it has the authority to provide the relief because federal law gives the education secretary broad power to “compromise, waive, or release any right, title, claim, lien, or demand” related to federal student loans.
In court documents filed Wednesday, the department said it has used this same authority to discharge more than $11.4 billion worth of student loans this year for borrowers who attended several shuttered for-profit colleges, including Corinthian Colleges, ITT Technical Institute and Westwood College.