The US Education Department is promising to process student loan forgiveness claims for nearly 170,000 borrowers within 18 months as part of a proposed settlement announced Friday in a federal lawsuit.
The suit alleges that Education Secretary Betsy DeVos illegally stalled a program known as borrower defense to repayment, which promises to forgive federal student loans for borrowers who are cheated by their colleges. When the lawsuit was filed in June 2019, it had been a year since the department issued a final decision on any claim.
Most of the borrowers awaiting decisions attended for-profit colleges, and some have been waiting more than four years for a decision.
Under the settlement, DeVos admits no wrongdoing but promises to issue decisions on all pending claims within 18 months, and to cancel debt for approved claims within 21 months. In court documents, the department said it had paused the program while officials crafted new regulations.
In a statement released Friday, the Education Department called the proposed settlement “an important win for students and for taxpayers.”
“Rather than have their claims needlessly delayed by unnecessary litigation, students will now have their cases adjudicated promptly,” the agency said. “This proposed settlement is validation of that process and of the department’s longstanding goal to resolve all of these claims as quickly as possible.”
The borrower defense program dates to the 1990s but was expanded under President Obama to make it easier for students to get loans erased when colleges commit fraud. The update was directed at thousands of students who attended for-profit colleges that collapsed amid accusations that they lied about the success of their graduates.