The administration of US President Joe Biden said the United States would cancel $6 billion in student loans for 200,000 borrowers who claimed they were scammed by their colleges.
The settlement between the borrowers and the US Department of Education was filed in the US District Court for the Northern District of California on Wednesday and must be approved by a federal judge.
Writing off student debt has become a priority for many liberals, and it could bolster popularity among younger and more educated Democratic-leaning voters before the November midterm congressional elections.
About 43 million Americans are in federal student loan debt, according to Educationdata.org.
The loans of these borrowers will be fully repaid and any payments made by them will be refunded, pursuant to a settlement lawsuit.
The borrowers’ lawsuit accused the Biden administration and former President Donald Trump of illegally delaying by several years any action on applications that borrowers filed with the Department of Education for debt relief.
In a statement Thursday, Education Minister Miguel Cardona called the settlement “fair and equitable for all parties” and said it would bring “billions of dollars of automatic relief” to 200,000 borrowers.
The Predatory Student Loan Project, which represents U.S. students in the fight against student debt, called the settlement “historic.”
The Biden administration had previously approved $25 billion in student debt relief for about 1.3 million borrowers.
The administration did not want to unilaterally write off the college’s debt held by the US government. Instead, the president had previously asked Congress to pass a debt relief bill that he could sign into law.