The Biden administration declared in a response to a legal action from the for-profit industry that it has the authority to automatically cancel $6 billion in federal student debt to over 200,000 borrowers with pending borrower-defense claims as a result of the settlement in Sweet v. Cardona.
In its response, released Tuesday, the department said that it has the authority to cancel the outstanding student debt of borrowers who attended a list of 150 colleges, all for-profit institutions, who said they were defrauded through misleading practices by the colleges.
“The settlement agreement provides for resolution of this lawsuit based on an exercise of the Education Secretary’s considerable discretion under the [Higher Education Act] to compromise and settle claims arising out of the federal student loan programs,” said the response.
The president of Career Education Colleges and Universities, Jason Altmire, did not offer a comment on the response to the Education Department when asked by Inside Higher Ed. CECU, which represents for-profit colleges, helped to coordinate the motions to intervene on the settlement that were filed on behalf of the for-profit sector just two weeks ago.
However, Altmire did say, “We’re not surprised at the response. We are going through some of the arguments that were made, which are more sweeping in their implications than only this settlement.”
The department also said that it will not seek to recoup any funding from institutions with pending borrower-defense claims, a central concern from for-profit colleges that argued that many of the colleges listed in the settlement did not get a chance to respond to pending claims. The department also stated in its response that it cannot recover funding from these colleges specifically because it has not provided “those schools with notice and opportunity to respond to any assertions of misconduct,” as required by borrower defense.
According to CECU, many colleges that were listed in the settlement were concerned about the reputations being harmed due to the pending borrower-defense claims that they say they never got a chance to respond to. The department stated in its response that the pending settlement does not concern fact-finding for the borrower-defense claims but rather the ability of the department to discharge the debts of students with pending claims.