Higher ed institutions to appeal Education Department’s $6B settlement with borrowers

Higher Ed Dive

Natalie Schwartz

January 17, 2023

Dive Brief: 

• Three higher education institutions filed notices last week that they intend to appeal a $6 billion settlement from the U.S. Department of Education that would automatically clear federal student loan debts for roughly 200,000 borrowers who say their colleges defrauded them.

• The two for-profits — American National University and Lincoln Educational Services Corp. — and the nonprofit Everglades College, have also asked a federal judge to temporarily pause the settlement agreement reached in Sweet v. Cardona until their appeal is heard.

• In 2019, borrowers accused the Education Department of improperly delaying decisions on their borrower defense to repayment claims, which allow the agency to wipe away students’ loans if their colleges misled them. Their class-action settlement with the Education Department was approved late last year, but the three institutions argue the agency lacks the legal authority to clear the debts en masse.

Dive Insight: 

The notices of appeal mark the latest development in the long-running Sweet v. Cardona case. If the three institutions are successful, it could delay or even altogether stop $6 billion worth of debt relief to hundreds of thousands of borrowers.

Eileen Connor, president and director of the Project on Predatory Student Lending, one of the groups representing borrowers in the lawsuit, lambasted the three institutions Tuesday for planning to appeal the settlement.

“This appeal demonstrates just how desperate these schools are to deny justice for borrowers, and we will not stop fighting until students get the relief they deserve,” Connor said in a statement.

The plaintiffs launched the lawsuit about three years ago, accusing the Trump administration of halting decisions on borrower defense claims. They neared a settlement agreement in 2020, but it fell apart when class members learned the Education Department was sending out blanket denials to their applications.

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