Around 200,000 former students who attended schools that they said cheated them will have their federal loans canceled under a settlement announced on Wednesday.
If you attended one of the more than 150 schools named in the class-action settlement, your loans will be wiped out. A federal judge called the denial notices that were sent to relief applicants disturbing.
The schools in the settlement are no longer open. The Dream Center, which ran the Art Institutes and other campuses, had its operations abruptly collapse in 2019. Tens of thousands of students were Enrolled at more than 100 locations. The University of Phoenix, Grand Canyon University and DeVry University are included in the deal.
The education secretary called the deal fair and equitable.
Settlement papers filed with the US District Court for the Northern District of California show that the Education Department granted relief to applicants from the schools included in the deal. The borrowers will have their loans eliminated and any payments they make will be returned.
The borrowers welcomed the deal with joy and relief. One person posted in a Facebook group that this is the most sexy thing they have seen in a long time. My debt will be wiped out because of my school's bad reputation.
The problem of relief claims from students who attended for-profit schools that saddled them with large bills for a subpar education has been a problem for three Presidential administrations.
Some of the industry's most notorious operators were pushed into bankruptcy a decade ago as a result of a state and federal raid. The debts that their former students incurred remained after the schools vanished.
The Obama administration tried to address the problem by updating a federal program called borrower defense to repayment, which allows those who attended schools that broke state consumer protection laws to have their federal student loans eliminated.
The program was frozen by Betsy DeVos, the education secretary under the president. In her last year in office, officials denied hundreds of thousands of claims.
The borrower defense program was revived by the Biden administration and was used to wipe out nearly $6 billion in loans for Corinthian College borrowers. At a number of other schools, it gave borrower defense claims.
There was a queue of tens of thousands of pending relief applications, many of them years old. The denials would be wiped out by Wednesday's deal. Within six to 30 months, the deal will resolve all applications that aren't automatically granted.
"This momentous proposed settlement will deliver answers and certainty to borrowers who have fought long and hard for a fair resolution of their borrower defense claims after being cheated by their schools and ignored or even rejected by their government."
The relief is limited to those who applied for a defense on or before June 22, 2022, The Education Department will have to decide if it will approve future claims from students who attended schools that it says acted illegally.
Mr. Biden is considering using executive action to make good on his campaign promise to eliminate federal student loan debt for everyone. His advisers are debating about the best way to deal with high inflation.
Theresa Sweet, one of the named plaintiffs in the class action lawsuit, said she was stunned to achieve what she considered justice after years of stress and that she felt certain the process would fall apart.
Ms. Sweet was a graduate of the for-profit school that closed in 2016 She was saddled with debt from a program that promised students lucrative careers but didn't give them the training or support they needed to make a living.
She said in an email that she hoped the experience of each and every class member would show that fighting for your rights is something you should never be afraid of. It has been a long road, but I believe we are finally where we need to be.