A federal appeals court has issued a ruling erasing $23 billion in student loan debt for an estimated 450,000 borrowers who were duped by false promises made by more than 150 for-profit colleges. The debt ruling for full settlement relief came on July 17 in a unanimous decision by a three-judge panel of the U.S. Court of Appeals for the 9th Circuit in the case known as Sweet v. McMahon.

Background of the Case

The case centered on a federal rule known as borrower defense to repayment that protects defrauded student loan borrowers who incurred massive debts on false promises and misrepresentations. The ruling found that more than 150 for-profit colleges used high-pressure sales tactics in their recruitment that targeted Black and Latino borrowers, veterans, and other low-income consumers to extract the maximum amount of federal loans, Pell grants, and veterans’ benefits with each enrollment.

Among these institutions are many of the largest and well-known for-profit schools like Capella University, three DeVry-branded schools, ITT Technical Institute, Keller Graduate School of Management, and the University of Phoenix. Full settlement relief means that the federal student loan(s) associated with the borrower’s attendance at the school will be discharged. Further, the Education Department will refund any amounts paid on those loans, and the credit report entries for those loans will be deleted from the borrower’s credit report.

Impact on Borrowers

The settlement includes borrower defense applications filed on or before November 15, 2022, as well as borrowers whose applications for borrower defense discharges were pending as of June 22, 2022. Any amounts paid to the Education Department on those loans will be refunded. These actions will be taken 90 days from the court’s decision to notify affected borrowers that they will receive full relief. Until this relief is provided, lenders cannot make any efforts to collect on these loans.

Original reporting: The Washington Informer — read the source article.