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Appeals Court Supports Sweet v. Cardona Settlement to Forgive $6 Billion in Student Debt

An appeals court panel has upheld a ruling that dismisses an appeal from three higher education institutions seeking to contest a class-action settlement related to the cancellation of approximately $6 billion in student debt. This settlement pertains to the Sweet v. Cardona case, which affects around 200,000 borrowers.

Court Decision

On November 6, 2024, the 9th U.S. Circuit Court of Appeals issued a decision affirming a prior ruling that determined the institutions—Lincoln Educational Services Corp., American National University, and Everglades College—did not have a “significantly protectable interest” in the settlement. The institutions had argued that the settlement would negatively impact their reputations; however, the court emphasized that as non-parties to the case, they lacked the legal standing to challenge the settlement’s terms.

Background of the Case

The plaintiffs in the case accused the U.S. Department of Education of mishandling their claims under the borrower defense to repayment regulations, designed to provide relief to students defrauded by their educational institutions. These claims date back to 2019 and were initiated during the Trump administration.

Details of the Settlement

Originally approved by a federal court in 2022, the settlement allows for the automatic cancellation of debts for certain borrowers associated with approximately 150 institutions, including those operated by the contesting colleges. According to the terms of the settlement, members of the plaintiff class are not required to make payments while their claims are under review.

Institution’s Concerns

The three institutions contended that their inclusion in the settlement harmed their reputations and requested a court to pause the settlement, a request that had previously been denied. This recent appellate ruling reaffirmed that denial.

Reactions to the Ruling

Legal representatives for the borrower class have characterized the ruling as a validation of the settlement, asserting that it confirms the right of affected borrowers to receive relief. Conversely, representatives from the for-profit colleges expressed concerns about the court’s handling of the issues they raised regarding the settlement.

Dissenting Opinion

A dissenting opinion from Judge Daniel Collins noted that the colleges had valid standing and raised important legal questions about the settlement’s approval by the Department of Education. Nonetheless, the majority opinion prevailed.

Conclusion

The legal proceedings surrounding the Sweet v. Cardona case have extended over several years, highlighting the complexities associated with federal student debt relief and the rights of borrowers facing institutional challenges.

Source: Higher Ed Dive

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