30,000 student loan borrowers expected to receive discharges as the final deadline passes

Student loan borrowers are expected to receive discharges on their loans after the Department of Education missed a critical deadline this week.

The borrower discharges are projected to reach up to 30,000 borrowers considered to be "post-class applicants" that would represent the final group of borrowers receiving financial relief under the Sweet v. McMahon settlement agreement, Forbes reported.

Forbes reported that this action would follow the first batch of discharge letters distributed to almost 170,000 post-class applicants in March after the Department of Education was unable to persuade several courts to prolong specific deadlines under the settlement agreement. 

How are the student loan discharges connected to the settlement?

Dig deeper:

In 2022, the Department of Education and thousands of student loan borrowers entered into an agreement to settle accusations that the federal agency unsuccessfully didn’t fairly process applications for student loan forgiveness through the Borrower Defense to Repayment program.

According to Forbes, this program permits student loan borrowers to request a discharge of their student loans if their school participated in specific types of fraud or misconduct, like deceiving prospective students about a program’s competitiveness, reputation, costs, or accreditation.

Under the Sweet v. McMahon settlement, the Education Department is required to enact huge discharges for student loan borrowers who submitted a Borrower Defense application by June 2022. 

Forbes noted that a second tier of borrowers, referred to as post-class applicants, who submitted a Borrower Defense application during a five-month timeframe after the settlement was completed but before it was approved by the court, would be allowed an automatic release of their student loans if the Department of Education didn’t review and make a decision on their discharge request within three years. 

Furthermore, the settlement requires the agency to issue discharge letters within two months and then must release the student loans for covered borrowers within 12 months of the letter. 

The Education Department appealed the court rulings and requested an emergency stay of the court’s mandate, but Forbes noted that the appeals court denied the agency’s request in March, permitting the student loan discharges to move forward.