For Ms. Sweet, the settlement “feels like a huge victory.” But even if her federal loans are forgiven tomorrow, she says, “I’m still starting from scratch.”

She is the lead plaintiff in a class-action lawsuit that reached a proposed settlement this month with the agency, which has agreed to a firm 18-month deadline for processing such claims. The compromise represents one step of progress while the larger question continues to play out: What’s the fairest way to satisfy the rights of misled borrowers while ensuring that students, colleges, and the government all fulfill their respective responsibilities?

By the time Ms. Sweet graduated in 2006, she says the only photography jobs available were unpaid. She has worked in sales and as a nursing assistant ever since. In 2016, she filed a “borrower defense” claim that would qualify her for loan forgiveness, and has been waiting for an answer from the U.S. Department of Education.

When Theresa Sweet enrolled in the Brooks Institute of Photography in California, she didn’t realize the school had been bought out by a for-profit company. Two years into a program that required Ms. Sweet to take out $46,000 in federal loans, Brooks came under investigation for mischaracterizing graduates’ salaries and other suspicious practices.

Fresh hope arrived this month for about 170,000 student borrowers who say their colleges defrauded them. Their requests for forgiveness of federal student loans, known as “borrower defense” claims, have gone unanswered by the U.S. Department of Education for months or years.

Now the agency, led by Secretary Betsy DeVos, has agreed to a firm 18-month deadline for processing the claims, through a settlement of the class-action lawsuit Sweet v. DeVos. With both sides framing it as a win, the compromise represents one step of progress while the larger question continues to play out: What’s the fairest way to satisfy the rights of misled borrowers while still ensuring that students, colleges, and the government all fulfill their respective responsibilities?

Recent actions by Congress, and multiple court rulings, reveal a bipartisan appetite for accelerating relief for defrauded borrowers.

Lead plaintiff Theresa Sweet says she followed a community college professor’s advice when she enrolled at what was then known as the Brooks Institute of Photography in California. The professor didn’t realize the school had been bought out by a for-profit company, she says. But two years into a program that required Ms. Sweet to take out $46,000 in federal loans and additional private loans, Brooks came under investigation for mischaracterizing graduates’ salaries and other suspicious practices.

By the time Ms. Sweet graduated in 2006, the only photography jobs the “career” office suggested were unpaid, she says in a phone interview. She has worked in sales and nursing assistant jobs ever since, she says.

After phoning hundreds of lawyers and getting nowhere, Ms. Sweet finally discovered the option of filing a borrower defense claim in 2016. She’s still waiting for an answer from the Education Department.

The settlement “feels like a huge victory,” she says. “I will get an answer. ... I won’t be just on the hook, waiting and waiting and waiting like I have been since I graduated.” But even if her federal loans are forgiven tomorrow, she says, “I’m still starting from scratch,” trying to build a positive credit history.

A reprieve for borrowers

The agreement will wipe out any interest these borrowers have accrued since filing their claims – once class members have the opportunity to comment and it is approved by the U.S. District Court for the Northern District of California.

It also includes the assurance that each month of delay beyond the new deadline would automatically lop 30% off an individual’s debt. And the agreement bars the garnishment of wages or other involuntary loan collections – with violations resulting in 80% of the borrower’s debt being canceled, according to the Project on Predatory Student Lending at Harvard University, which provided counsel for the plaintiffs.

“Getting rid of some of that interest and stopping the collections for this set of borrowers is really important; a lot of these people are in default,” says Beth Stein, a senior adviser at The Institute for College Access & Success (TICAS).

Some of them are military veterans who used up their post-9/11 GI Bill education benefits and have told the Project on Predatory Student Lending that they feel betrayed not only by their schools, but now by the government as well.

Secretary DeVos has long held that her job is to protect American taxpayers by looking closely at borrower defense claims and demanding adequate proof that a student has been harmed. In public remarks she has attributed the delays to various lawsuits challenging the department’s approach.

The Education Department called the Sweet settlement “an important win for students and for taxpayers,” in a statement emailed to the Monitor by press secretary Angela Morabito. “The Department put a sound adjudication methodology in place. ... This proposed settlement is validation of that process and of the Department’s longstanding goal to resolve all of these claims as quickly as possible.”

In October, a federal judge in a separate case held Secretary DeVos in contempt because the Education Department illegally tried to collect debt from thousands of borrowers defrauded by the now-defunct Corinthian Colleges.

After more than a year in which the agency processed no borrower defense claims, the wheels started turning again in December. The Project on Predatory Student Lending estimates that 40,000 claims have been processed since then.

Secretary DeVos, aiming to reverse what she deemed overreach in the Obama administration, has written a new borrower defense rule, set to take effect July 1.

Among other restrictions, it would take away borrowers’ right to appeal, says Kyle Southern, who directs higher education policy work for the nonprofit advocacy group Young Invincibles. “This department has shown itself time and again to be more concerned with protecting the interests of predatory for-profit institutions than the rights of defrauded student borrowers,” he says.

The U.S. House and Senate have both voted on resolutions, with some bipartisan support, to overturn the new rule. In February, President Donald Trump’s advisers said they would recommend a veto, but he hasn't yet stated his intentions.

Embarrassment and accountability

Ms. Sweet says many borrowers in her situation are embarrassed to talk about falling for their college’s false promises. But she hopes the lawsuit will help the public “understand that what happened to us, it was fraud.” The government should be protecting students, she says, and if taxpayers are going to be upset, they should direct it at agencies that failed to hold schools accountable. “They shouldn’t be angry with students who were defrauded,” she says.

The debates over borrower defense claims are part of a “much bigger college accountability debate,” says Neal McCluskey, director of the Center for Educational Freedom at the Cato Institute, a libertarian think tank. While borrower advocates criticize Secretary DeVos for hiring people with ties to the for-profit education industry, he says, she has in turn suggested that those trying to police the industry are overzealous.

“We have seen evidence sometimes that charges against schools, lenders, services – that they appear worse when first reported than they are when you dig in,” he says.

Robert Eitel, an adviser to the Education Department and former executive at two for-profit education companies, generated controversy by reportedly being involved in rescinding the former borrower defense rule. An inspector general’s report recently concluded that Mr. Eitel did not appear to be in violation of federal ethics laws.

Depending on the extent of the economic slowdown, for-profit colleges might scale up quickly to encourage people out of work to go back to school, says Ms. Stein of TICAS. She offers some advice to prospective students: Shop around, and don’t let a school pressure you into making a quick decision to enroll.

“The Department of Education has really worked hard, under this administration and the previous administration, to get better information online for students through the College Scorecard,” she says. “See if you could go to a similar program at a community college or somewhere else nearby for a whole lot less money.”