450k borrowers say they were ripped off. Their student loans are being erased

A long legal fight is ending for nearly 450,000 federal student loan borrowers. These individuals say their colleges defrauded them. A recent court ruling means their debts will finally be erased.

The class-action lawsuit has gone on for seven years. It started against the first Trump administration. The case focuses on a federal rule called "borrower defense." This rule lets borrowers ask the U.S. Education Department to cancel their debts if a school lied to them. This could be about job prospects, transferring credits, or future salaries.

The Lawsuit's Journey

During Trump's first term, thousands of borrowers claimed they were cheated by predatory schools. They waited years for their borrower defense claims to be reviewed. Advocates then sued. They argued that the Education Department, under Secretary Betsy DeVos, had illegally stopped processing claims. They also said the department wrongly denied claims without looking at their merits.

The lawsuit has been renamed three times. It started as Sweet v. DeVos in 2019. Then it became Sweet v. Cardona during the Biden administration. Now, it is Sweet v. McMahon for Trump's second term.

Eileen Connor, executive director of the Project on Predatory Student Lending (PPSL), said the settlement has helped over 450,000 people. It has improved their finances by over $23 billion. PPSL is the group that filed the lawsuit. Connor believes the Sweet settlement will be the largest ever against the U.S. government once all loans are discharged and refunds are completed.

Why It Took So Long

In 2022, the Biden administration agreed to a major settlement in the case. It promised that borrowers from a list of over 150 mostly for-profit colleges would get full, automatic loan relief.

The settlement also let more than 250,000 other borrowers apply for relief after the settlement. The department had a set time to review these new claims. If they didn't, the loans would have to be canceled.

The second Trump administration later said in court that it had only processed 60,000 of these applications by the deadline.

The current Education Department asked for 18 more months to review the applications. They wanted to make sure taxpayer money only went to those who deserved relief.

However, on July 17, the U.S. Court of Appeals for the Ninth Circuit ruled against the department. The court said the settlement's obligations were clear early on. The department waited three years to object.

Ellen Keast, an Education Department spokesperson, said the Sweet settlement had an "unrealistic deadline." She stated the department followed court orders in good faith and believed the court was wrong to deny their request.

A Borrower's Experience

Jessica Feindt, from near Flint, Mich., is one of the borrowers who waited years for relief. She was among the first in her family to go to college. She enrolled at the University of Phoenix for a psychology degree.

Feindt said the school heavily advertised in her area. She earned her degree quickly but took on a lot of federal debt. She later realized her recruitment counselor had misled her. For example, the counselor told her her degree would be accepted by Michigan graduate programs, but it wasn't. In 2022, she filed a borrower defense claim.

Court documents from April show that after the 2022 Sweet settlement, the Education Department provided about $12 billion in loan discharges and refunds. This helped nearly 300,000 federal student loan borrowers. After the July ruling, this amount will grow even more.

Connor compared the case of schools defrauding borrowers to the historic settlement against Big Tobacco. She called these student loans to predatory schools "toxic products."

Less than a week ago, Feindt saw her college debts were gone from her federal student loan account. They were erased after the latest Sweet case developments.

Feindt said she should be happy, but she is "really angry about all the years that my family suffered under these loans."

Deep Dive & References

• July 17 Ruling
• Court Documents from April