Dive Brief:

• A federal appeals court last week rejected three colleges’ request to stop loan discharges for student loan borrowers who enrolled in those institutions and alleged they were defrauded. 
• The ruling represents another update in the $6 billion Sweet v. Cardona class-action settlement. The deal ends a lawsuit from borrowers who alleged the U.S. Department of Education failed to approve loan cancellations to which they were entitled.
• A court order in February had paved the way for most of the loan discharges to proceed. However, the three institutions — the for-profit American National University and Lincoln Educational Corp., and nonprofit Everglades College — had asked the court to block loan forgiveness for their former students while they appealed. Their appeal is still pending, but under the new ruling, those borrowers can now receive their share of relief.

Dive Insight:

In 2019, borrowers sued the Education Department, alleging the Trump administration improperly delayed deciding on their applications for a loan forgiveness program known as borrower defense to repayment.

This allows the federal government to wipe away loans of borrowers whose colleges have misled them in some fashion, like about their job prospects after graduation.

In June last year, the Biden administration struck a settlement in the case, which set up automatic loan cancellation for some 200,000 borrowers who attended 150-plus colleges. A federal judge approved the settlement in November.

Colleges had attempted to halt the deal, but the February court ruling allowed it to proceed.

Students who applied for relief under borrower defense before June 2022 but did not attend one of the colleges in the deal will get a “streamlined” decision within two years, according to the settlement.

Those who did not apply for forgiveness until after June last year will receive decisions on loan forgiveness by January 2026.