Biden administration cancels federal student loans for 200,000 borrowers

Many of the schools named in the lawsuit are now out of business
Graduation, stock photo

The Biden administration reached a settlement that will cancel $6 billion in federal student loans for about 200,000 former students who claimed their schools defrauded them.

Plaintiffs in the Sweet v. Cardona lawsuit (originally filed as Sweet v. DeVos) sued the Department of Education in 2018 because the agency was not issuing decisions on "borrower defense" applications, CBS News reported.

The former students involved in the lawsuit will have their debt discharged and any payments they made will be refunded, even if the debt was fully paid off. 

"Since day one, the Biden-Harris Administration has worked to address longstanding issues relating to the borrower defense process," Education Secretary Miguel Cardona wrote in a press release responding to the settlement. 

"We are pleased to have worked with plaintiffs to reach an agreement that will deliver billions of dollars of automatic relief to approximately 200,000 borrowers and that we believe will resolve plaintiffs’ claims in a manner that is fair and equitable for all parties," he added.

Students who submitted a borrower defense application on or before June 22, 2022 will be eligible for debt relief if they attended one of the more than 150 schools named in the lawsuit, The New York Times reported. 

Many of the schools are now out of business, such as the Art Institutes chain, whose parent company, Dream Center, collapsed in 2019. Other schools still in operation include the University of Phoenix, Grand Canyon University, and DeVry University.

While Trump Education Secretary Betsy Devos froze the borrower defense program, the Biden administration revived it, using it earlier this month to wipe out billions in loans for 580,000 former Corinthian Colleges students.