On Thursday, the Supreme Court declined to grant a group of universities’ request to halt a $6 billion settlement that will erase the student loans of approximately 200,000 borrowers who claim their institutions deceived them.
Without dissent or further remark, the court rejected the request for an immediate stay of the settlement.
The issue has nothing to do with President Biden’s bigger initiative, which the justices are expected to rule on in the coming months, to cancel up to $20,000 in student debt for tens of millions of borrowers.
However, opponents of that broad policy had hoped that if the $6 billion settlement was successfully contested, it would undermine a backup plan for Biden to erase further debt in the event that the court rejected the relief plan.
The agreement ends a class-action lawsuit brought in 2018 by individuals who claimed that the Education Department had disregarded their requests for loan forgiveness under the “borrower defense to loan repayment program.”
Applicants who attended one of the 151 institutions—many of them for-profit colleges—that the agency accused of “substantial misconduct”—whether credibly alleged or, in some cases, proven—will be eligible for full loan forgiveness under the terms of the agreement.
The agreement was accepted in November by U.S. District Judge William Alsup of the Northern District of California. Everglades College, American National University, and Lincoln Educational Services, parent firm of Lincoln Technical Institutes, however, appealed the decision, claiming that the agreement failed to evaluate the veracity of the borrowers’ claims and would harm their reputations.
Additionally, they assert that the Education Department is going outside federal regulations by disobeying its own guidelines for handling borrower defense cases.
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The institutions turned to the Supreme Court for help after the U.S. Court of Appeals for the 9th Circuit rejected a motion to put the agreement on hold while the court evaluated the issue.
In order to forward Biden’s debt relief program, the department went beyond its legal boundaries, according to a group of 20 Republican attorneys general, who requested the high court to weigh in on the settlement case.
The [Education] Secretary fought back against these class-action allegations for years. But the Secretary had a change of heart once the President chose to cancel student debt by executive order,” the attorneys general stated in their amicus brief.
The Secretary grabbed vast power that Congress had never granted him by strategically giving up the case. The Secretary was able to seek the widespread forgiving of student loans thanks to this illegally acquired power.
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