The Sweet v Cardona lawsuit led to the cancellation of $6 billion in federal loans for nearly 200,000 former students, including many former Art Institute students, who submitted borrower defense claims alleging their schools defrauded them.
Predominantly, these schools are for-profit colleges and vocational programs. Notably, this settlement overturned 128,000 denial notices issued when the Trump administration oversaw the Borrower Defense process.
Key points in this settlement include:
The list of schools named in the class-action lawsuit, many now defunct, includes the Art Institutes, campuses run by the Dream Center, and those owned by Career Education.
Active colleges such as the University of Phoenix, Grand Canyon University, Argosy University, and DeVry University are also part of the settlement.
The settlement cancels loans, refunds any payments made, and removes the loans from their credit reports.
This settlement marks an important chapter in years of regulatory action against for-profit colleges.
The Obama administration established the Borrower Defense program, designed to forgive loans for students at schools that broke state consumer protection laws or committed other serious misdeeds. But the program was put on hold under the Trump administration’s Education Secretary, Betsy DeVos, leading to a backlog of claims.
The Biden administration reactivated the Borrower Defense program, eliminating nearly $6 billion in loans for students who attended institutions like Corinthian Colleges, notorious for its illegal recruiting tactics.
The relief extends to those who submitted a Borrower Defense application by June 22, 2022.
The Education Department still needs to decide on approving future claims from students who attended the named schools.