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Education Department Begins Discharging Loans of Borrowers Alleging Fraud from Colleges

The U.S. Department of Education (ED) is now discharging student loans of borrowers alleging they were defrauded by their colleges after a federal judge recently ruled that a $6 billion settlement could proceed, The Washington Post reported.U s Department Of Education (ed)

The settlement stems from a 2018 class-action suit from people accusing ED of ignoring applications for loan forgiveness through a federal borrower defense program. First approved in November, the verdict was appealed by Everglades College, American National University, and Lincoln Educational Services, parent company of Lincoln Technical Institutes.

The judge of the case, U.S. District Judge William Alsup, denied a motion to halt the full settlement on Feb. 24 but agreed to pause loan cancellation for a week for applicants from the three schools to give the colleges a chance to seek a stay from the appellate court.

“Resolution of a lawsuit concerning monumental delay should not be delayed any longer by three intervenor schools who were not parties to the settlement agreement and who were not in the long, hard-fought litigation that preceded it,” Alsup wrote in his ruling.

A spokesman for Everglades College said the school has requested such a stay. The three aforementioned schools are among 151 institutions — many are for-profit — that ED said had engaged in “substantial misconduct … whether credibly alleged or in some instances proven.”

“Accountability and transparency require regulatory consistency, adherence to due process, and strict observance of the law that protects not only students and taxpayers, but also the institutions that serve them,” a Thursday statement from Everglades College read. “We believe that any student with a valid [borrower defense] claim has the right to have it fairly evaluated. However, the settlement ignores the law and grants relief regardless of the evidence or the merits of a particular claim.”

Objections include that the deal did not assess the validity of the borrowers’ claims and that ED was violating federal procedure. But Alsup argued that the schools lost no procedural rights and failed to show how the settlement poses them actual harm.

“The relief provided by this settlement … will allow plaintiffs to breathe easier, sleep easier, repair their credit scores, take new jobs, enroll in new educational programs, finish their degrees, get married, start families, provide for their children, finance houses and vehicles, and save for retirement,” Alsup wrote. “It will allow them not only to move on, but to move up, elevating others in the process.”

The agreement provides about 200,000 people relief, including refunds of money paid to the federal agency and credit repair. And approximately 64,000 more borrowers, who attended schools not on ED’s list, are entitled to receive application decisions on a rolling basis.

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