Their colleges closed, but the government refuses to erase their debts, lawsuit says
⟶ Thousands of student loan borrowers whose colleges closed have filed a class-action lawsuit against the Department of Education. The suit alleges the department has illegally denied them debt relief. The borrowers argue they are entitled to loan discharges because they did not receive the education they paid for.
Student Loan Borrowers File Class Action Suit Against Education Department For Denying Loan Discharges. Thousands of student-loan borrowers whose schools shut down have been illegally denied debt relief, a new lawsuit says.
Background
Federal student loan programs include provisions for borrowers who were defrauded or whose schools closed. Typically, if a school closes and students cannot complete their programs, they can apply for a "borrower defense to repayment" discharge, which cancels their federal student loan debt. This process is managed by the Department of Education, which reviews applications for eligibility.
Why it matters
The lawsuit claims the Department of Education is systematically denying these applications without proper review, contradicting existing regulations. This failure to provide relief leaves former students burdened with debt for an education they never received.
Possible impact
The outcome of this lawsuit could affect thousands of borrowers by potentially discharging billions of dollars in student loan debt. It may also lead to reforms in how the Department of Education processes borrower defense claims. This could influence future government policies regarding student loans and for-profit colleges.