The case has nothing to do with President Biden’s broader effort to forgive up to $20,000 in student debt to tens of millions of borrowers, which judges are set to rule in the coming months. But opponents of this sweeping policy had hoped that a successful challenge to the $6 billion settlement would undermine an alternative path for Biden to overturn another. Debt if the court closed relief plan.
The settlement resolves a class-action lawsuit filed in 2018 by people who accused the Department of Education of ignoring their requests for loan forgiveness through the borrower’s defense of the repayment program. The department granted full loan forgiveness to the applicants who attended 151 institutionsseveral for-profit colleges, which the agency has accused of “significant misconduct … whether credibly alleged or, in some cases, proven.”
US District Judge William Alsop of the Northern District of California He agreed to the settlement in November. But the ruling has been appealed by College Everglades, US National University and Lincoln Education Services, the parent company of Lincoln Technical Institutes, arguing that the deal did not assess the validity of the borrowers’ claims and would damage their reputations. They also allege that the Department of Education is violating federal procedures by circumventing its own rules for resolving borrower defense claims.
The Ninth Circuit of Appeals denied a request to put the deal on hold while the court heard the case, prompting the institutions to seek relief from the Supreme Court.
The settlement agreement provides automatic relief, including refunds of funds paid to the federal agency and credit reform, to about 200,000 people who attended 151 institutions cited by the Education Department. Another group of about 64,000 borrowers who attended other schools are entitled to receive decisions on their relief applications at the rolling deadlines.
The Ministry of Education told the Supreme Court that 78,000 borrowers had already repaid their loans under the settlement.