Trump Administration Seeks More Time on Student Loan Borrower Decisions
The Trump administration has requested additional time to determine if around 200,000 student loan borrowers are eligible for forgiving their loans.
Under the Sweet v. McMahon settlement related to Cardona v. Sweet, the Biden administration agreed to process loan relief applications based on borrower defenses submitted by June 22, 2022, in three distinct groups within a set timeframe.
These borrowers are seeking relief through the Borrower Defense Program, designed to help those defrauded by their educational institutions. Some claims related to this settlement have been pending for over seven years.
While the first two groups received decisions on their applications according to the schedule, the Department of Education now seeks an extension for the final group, which is expected to receive decisions by the end of January.
If a ruling isn’t reached by January 28, a total of $12 billion in loans could be automatically forgiven.
“The settlement from Sweet, negotiated under the previous administration, creates a timeline that mandates the department to cancel up to $12 billion in student loans by January 2026 without adequate review,” stated Education Under Secretary Nicholas Kent.
“Although the Department has adhered to court-imposed deadlines, the impending January deadline feels unreasonable. Without enough time to assess each debtor defense case properly, taxpayers might face up to $6 billion in unnecessary forgiveness for ineligible borrowers,” he continued. “We are asking for more time to ensure a thorough review of these applications to relieve taxpayers from footing the bill for ineligible loans.”
The Department contends that the timeline for the last group is impractical, particularly because this third group of borrowers is significantly larger than anticipated when the settlement was established. After the settlement agreement and before final court approval, 251,000 applications were submitted in this third group.
A senior official from the Education Department mentioned that the federal government plans to meet its obligations under the agreement and will utilize external contractors for assistance, while officials from the Department will retain final decision-making authority.
According to the official, the current acceptance and rejection rates for borrower defense applications are each at 50%.
The official also refuted claims that recent delays were due to personnel reductions, emphasizing that the layoff of about half of the Department’s staff since Trump took office has not hindered the settlement processes.
“However, situations have evolved, including the unexpectedly large size of the post-class funding pool and new requirements for discharging certain nonconforming loan obligations independent of a Borrower Defense application. Therefore, we believe the court should grant us relief regarding this aspect of the settlement agreement,” states the complaint.
The department is requesting a new decision deadline of July 28, 2027, for this last group of borrowers.
They argue that it would be unjust to rush these applications and issue relief that taxpayers wouldn’t have to pay for.
“What would taxpayers think if we simply canceled $12 billion in federal student loans without adequately reviewing the merits?” the official asked.
The other two groups that received timely relief had higher acceptance rates and didn’t see a dramatic increase in borrowers post-settlement, according to the official.
The Trump administration has indicated it will continue to seek more time regarding the ruling, amidst ongoing opposition to large-scale student loan relief initiatives from the Biden administration.
Additionally, the department has successfully dismantled President Biden’s income-driven repayment plan, known as Savings for Valuable Education (SAVE), which had been described as the most generous student loan program ever.
