Another Student Loan Forgiveness Challenge Heads To The Supreme Court — Key Updates

Another Student Loan Forgiveness Challenge Heads To The Supreme Court — Key Updates

Yet another legal dispute over student loan forgiveness could head to the Supreme Court, leaving thousands of borrowers unsure of what’s to come.

The Supreme Court is already considering two legal challenges to the one-time debt relief plan signed by President Joe Biden. This massive initiative will allow 40 million borrowers to receive $10,000 or more in federal student loan forgiveness. The court held a historic hearing in February where justices hammered lawyers for both sides of the dispute, and a decision is expected in June. Meanwhile, no borrower has received loan waiver under the initiative.

But now, another legal tussle over a smaller, but still significant student loan forgiveness initiative is being appealed to the Supreme Court. It is too early to know what the court will do. But here’s what borrowers should know.

Landmark settlement approved to resolve dispute over student loan forgiveness applications

the latest controversy Sweet V. cardona The case, a long-running class action lawsuit brought by student loan borrowers against the Department of Education for allegedly withholding or improperly denying borrower defense for repayment applications. The Borrower Defense Program allows federal student loan borrowers to request debt relief, including loan forgiveness, if they were misled or defrauded by their school. in debtors Sweet V. cardona The case alleged that the Department of Education ignored thousands of applications (in some cases for years), or issued arbitrary denials that had little or no factual basis.

After years of legal wrangling across two presidential administrations, a federal district court judge approved a landmark settlement last November to finally resolve the lawsuit. Under the settlement, more than 200,000 borrowers will receive $6 billion in student loan forgiveness if they attend one of several dozen schools (mainly for-profit institutions) listed in the settlement. Other borrowers may also benefit from settlement relief, even if they have not joined either of those institutions. The Department of Education was expected to begin implementing the settlement relief early this year.

Three schools trying to block $6 billion in student loan forgiveness Sweet V. cardona Settlement

Just as the settlement relief was about to begin, three schools involved in the settlement – ​​American National University, Everglades College, Inc., and Lincoln Educational Services – requested student loan forgiveness and others to intervene and withhold $6 billion. filed. Debt relief that a settlement agreement provides. The schools argued that the settlement agreement, the process for reaching it, and the fact that they were listed as covered schools were unfair and damaging to their reputations.

In February, the same federal district court judge who approved the settlement rejected the schools’ arguments in a detailed decision, and allowed the settlement relief to proceed. “The resolution of a lawsuit involving significant delays should not be delayed by the three intervening schools, who were not parties to the settlement agreement and who were not in the long, hard-fought litigation,” the judge wrote in his decision. He said debt relief should allow affected student loan borrowers to “breathe easier, sleep easier, repair their credit scores, take new jobs, enroll in new educational programs, complete their degrees, get married, start families, get their jobs done.” to provide for the children”. Finance homes and vehicles, and save for retirement. This will allow them to not only move forward, but to uplift others in the process of moving forward.

However, all three schools continued their efforts to block settlement relief. He appealed to the Ninth Circuit Court of Appeals, seeking another stay on settlement implementation. The court granted a temporary, limited pause on settlement relief specifically associated with the three challenged schools, but allowed the Department of Education to implement the remaining $6 billion in student loan forgiveness mandated by the settlement.

Last week, the Ninth Circuit Court of Appeals issued a ruling allowing the three schools to continue with their appeals, but denied their request to further block settlement relief. In its brief ruling, the court said the “three schools” failed to demonstrate a sufficient likelihood of irreparable harm to warrant a stay of the challenged settlement pending these appeals. That decision paved the way for the Department of Education to implement Sweet V. cardona Settlement relief in full, including for covered borrowers participating in the three challenged institutions.

Challengers now appeal to Supreme Court to block student loan forgiveness under settlement

But on Wednesday, the three schools indicated they would appeal the Ninth Circuit’s decision to the US Supreme Court, arguing that the Department of Education exceeded its authority to cancel student loans under the Higher Education Act (HEA). have taken. The Biden administration is relying on the HEA’s debt cancellation provision to enforce it. Sweet V. cardona settlement agreement.

The “HEA” does not in any way claim the limitless and unilateral power that the secretary now claims, the three challengers wrote in court papers. “The Secretary’s claimed authority is nothing less than the power to cancel every student loan in the country.”

The authority under the HEA that allows the Secretary of Education to “compromise” or “forgive” federal student loan debt is a different legal authority than the Biden administration, which previously argued that huge one-time student loan waivers To implement loan waiver scheme. The Supreme Court in February based that plan on the HEROES Act of 2003, which allows the Department of Education to “modify” exempt federal student loan programs in a national emergency such as a pandemic. However, consumer advocacy groups have urged the Biden administration to consider the HEA provision as a “backup” option if the Supreme Court rejects HEROES Act authorization.

What will the Supreme Court do?

The Supreme Court does not entertain most of the appeals it receives. If the Court takes no action, it will vacate an earlier decision by the Ninth Circuit Court of Appeals, which allowed the Department of Education to implement all debt relief permitted under the Settlement Agreement, including those for all Covered Borrowers. Including student loan forgiveness.

But if the Court accepts the schools’ appeal, it could issue a decision on the merits, and the breadth of the Higher Education Act’s student loan forgiveness authority could become a central issue. In the short term, the Court may also impose a temporary stay while the appeal is considered, which may force the Department of Education to stop implementing the settlement relief again.

However, the adjournment request has been submitted to Justice Elena Kagan, one of the court’s liberal members, who is unlikely to agree with the schools’ arguments. During last February’s Supreme Court hearing on Biden’s mass student loan forgiveness plan, Kagan was one of the most vocal justices defending Biden’s authority to enact student loan forgiveness using executive action.

For now, in the absence of any further order from the court, the education department is continuing with its plans to implement Sweet V. cardona settlement relief.

Further Reading Student Loan Forgiveness

4 Important Student Loan Forgiveness Dates Borrowers Should Know

453,000 borrowers approved for student loan forgiveness under waiver as processing continues

Republican effort to repeal Biden’s student loan forgiveness plan gains steam

What happens if the Supreme Court rejects Biden’s student loan forgiveness plan?

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