200k students claiming borrower defense are closer to loan forgiveness A federal judge granted preliminary approval of a settlement that would cancel the loans of more than 200,000 student borrowers who say they were defrauded by their colleges.

200k student borrowers are closer to getting their loans erased after judge's ruling

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Early next month, we expect a big legal decision in the student loan world. A federal judge will be considering a settlement between the U.S. Department of Education and borrowers who say they were ripped off by predatory colleges. Final approval from the judge would erase the debts of 200,000 borrowers and potentially even more. NPR's Cory Turner has been covering this story for literally years. He joins us this morning. Hey, Cory.


MARTIN: Walk us through the basics of this case and how we got here.

TURNER: At the center of the case is a federal rule that allows borrowers to basically ask the Education Department to cancel their federal student loans if they've been defrauded; so, for example, if a college recruits you with false promises about how much money you're going to make or the kind of job you might get or they tell you your credits will transfer, but then they don't. So the Obama administration used this rule to begin canceling loans a few years ago for borrowers at Corinthian Colleges and ITT Technical Institute. But the Trump Education Department, under Secretary Betsy DeVos, stopped processing these claims entirely and then actually began issuing what appear to be blanket rejections. So borrowers responded by suing DeVos and the department.

MARTIN: So late last month, then, the Biden administration reached this settlement with the borrowers. What can you tell us about that?

TURNER: It is both a generous settlement but also controversial. On the generous side, it would erase the debts, as we said in the intro, of 200,000 borrowers. It would reconsider the cases of another 64,000 borrowers. I spoke with the plaintiffs' co-counsel, Eileen Connor. She's also director of the Project on Predatory Student Lending. And she told me she hopes the settlement, if it's approved, will mean defrauded borrowers won't have to fight so hard to get help in the future.

EILEEN CONNOR: So we're switching from a point of hostility to what I hope is acceptance, where this is going to be a process that people know about and that actually does deliver cancellation where it's warranted.

MARTIN: Cory, you said the settlement is also controversial. Why is that?

TURNER: Because it includes a list, Rachel, of 153 colleges and universities. Most of them are for-profits. And these schools, the settlement says, committed, quote, "substantial misconduct." And many of them have, but the problem is, not all of these schools have been investigated, let alone found to have actually committed any kind of real fraud. And some of these schools are still open. They are still enrolling students, including the massive University of Phoenix. Several on the list have filed official protests, calling the settlement a farce. I spoke with Jason Altmire. He heads the Career Education Colleges and Universities. It's a group that represents many of the schools on this settlement list. He told me they're being accused of substantial misconduct without getting a chance to actually defend themselves.

JASON ALTMIRE: There is clearly reputational damage that has been done for the schools that are on this list, and there's due process issues related to that. So we have many concerns related to that settlement.

TURNER: What's not clear at this point, Rachel, is what impact, if any, these protests from these listed schools will actually have on the judge's thinking or on the settlement's future. One thing, though, is for sure. This settlement is not going to erase the backlog of fraud claims fully because according to the department, in just the two weeks or so after this settlement was announced, they got 60,000 new claims from borrowers.

MARTIN: Wow. NPR education correspondent Cory Turner, thank you.

TURNER: You're welcome, Rachel.

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