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200,000 student-loan borrowers will be ‘severely harmed’ if a judge rules in favor of 3 companies who want to block them from getting $6 billion in debt relief, a new legal filing says

Graduate students in front of White House.Students from George Washington University wear their graduation gowns outside of the White House in Washington, DC, on May 18, 2022

Stefani Reynolds / AFP)

  • A federal judge signed off on a settlement giving 200,000 student-loan borrowers $6 billion in debt relief last year.
  • In January, three companies requested a stay on the relief, citing reputational harm the settlement brought them.
  • Borrowers in the case recently filed a motion opposing the stay due to the harm postponing the relief would bring.

A group of student-loan borrowers who believe they were defrauded by their schools responded to the companies that want to block them from getting long-awaited debt relief.

In January, two for-profit higher-education companies — Lincoln Educational Services Corp. and American National University — and Everglades College, Inc., a nonprofit, filed notices to appeal federal Judge William Alsup’s November decision to give 200,000 student-loan borrowers $6 billion in debt relief and requested that he put a stay on that relief as the appeals process plays out. Some of the borrowers who were set to see debt forgiveness attended colleges run by those companies, which were among many named in the November settlement.

This was a result of a lawsuit, Sweet v. Cardona, first filed in 2019 under former President Donald Trump’s Education Department, in which the plaintiffs accused the department of failing to process borrower defense to repayment applications, which are claims borrowers can file if they believe they were defrauded by their school.

Per the terms of the settlement in favor of the students, the Education Department identified 153 schools it found to have engaged in misconduct, and any student who attended one of those schools would receive full relief automatically. 

While President Joe Biden’s Education Department agreed to the settlement and Alsup signed off on it, the three companies filed an appeal claiming they were not given “due process” after being included in the settlement, saying that they “will immediately suffer the stigma of having all BD claims against them summarily granted—without any administrative process, judicial factfinding, or reasoned decision on the merits.”

Last week, the plaintiffs in the case filed an opposition to the request to the stay the relief, writing in the legal filing that the companies would not be harmed if the borrowers get relief, but the borrowers would be “severely harmed” if the process was paused.

“They have already waited years for the resolution of their borrower defense (‘BD’) applications, some of which have been pending since 2015,” the filing said. “The loans that would be discharged under the Settlement continue to shadow them, affecting their credit, their livelihoods, their mental health, and countless other aspects of their lives. One hundred and forty-four borrowers have submitted declarations attesting to the harm a stay would cause them.”

The filing went on to push back on the companies’ concerns of reputational harm, saying they have failed to provide evidence of such harm, but noted how delaying this relief during the appeals process will significantly hurt borrowers. For example, one borrower said in the filing that the “stay will keep me from being able to take out enough loans to finish my degree, which I need in order to have a career that I can make a meaningful, livable wage with.”

Alsup is set to take up the issue of granting a stay on February 15. Eileen Connor, president and director of the Project on Predatory Student Lending, which represents the borrowers in the case, said in a statement that “each day that justice is delayed means additional harm for borrowers and their families who have already been forced to wait years for a resolution.”

“These baseless appeals show just how hard students must fight to protect their rights and get relief they are owed under the law,” she said. “The court’s decision granting approval of this settlement is clear and unequivocal, and as our filing details, further delay would only compound the significant harm and trauma borrowers have suffered throughout this process.”

Read the original article on Business Insider