The U.S. Supreme Court has agreed to hear the federal government’s appeal of a lower court ruling halting the expansion of defenses that student loan borrowers can use to contest repayment.
An association of colleges challenged the U.S. Department of Education’s rule setting the procedures that student borrowers can follow to establish that they were defrauded by the schools they attended and thereby qualify for student loan forgiveness. Some borrowers claim that schools defrauded them by using unethical recruitment tactics or by advertising exaggerated post-graduation job placement figures.
The court granted the government’s petition in U.S. Department of Education v. Career Colleges and Schools of Texas on Jan. 10. No justices dissented. The court did not explain its decision. Oral argument in the case has not yet been scheduled.
A private college trade association, the Career Colleges and Schools of Texas, sued the federal government, arguing that it exceeded its legal authority in promulgating the rule, which expanded the category of borrowers who would qualify for debt relief. A district court held in favor of the government.
On appeal, the U.S. Court of Appeals for the Fifth Circuit reversed, agreeing with Career Colleges, and issued an injunction stopping the program.
The law also requires the Department of Education to “specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan.”
The department has for years allowed borrowers to raise such defenses to repayment claims directly with the department before and during the formal collection process.
The department said the rule clarifies the procedures that the agency uses when considering requests for repayment relief. The procedures needed clarification because processing backlogs arose, according to the department.
The member schools belonging to the Career Colleges and Schools of Texas would experience injury from the department’s “rule that revamped regulatory provisions on student-loan discharges based on the acts, omissions, or closures of higher-education institutions,” the circuit court found.
U.S. Solicitor General Elizabeth Prelogar argued that the petition should be granted because the department has the authority to “compromise, waive, or release any right, title, claim, lien, or demand” in the administration of its loan portfolio.
In that ruling, the Supreme Court struck down President Joe Biden’s controversial plan to partially forgive student loans. Biden unveiled the plan in August 2022 in a move that critics decried as a constitutionally dubious attempt to help Democrats in the November 2022 congressional elections. The Congressional Budget Office said the plan could cost about $400 billion, but the Wharton School estimated that the price tag could exceed $1 trillion.
There is no split among the federal courts of appeal on the question of the department’s legal authority, and the rule “is unlikely to be maintained, let alone defended by the incoming administration,” the brief stated.
Biden will be succeeded by President-elect Donald Trump on Jan. 20.
The Fifth Circuit correctly found the rule in question to “exceed the Department’s statutory authority in multiple respects as well as impose slanted procedures and presumptions that were not designed to ascertain truth, but instead pursue the Department’s express objective to ‘increase the number of borrowers who receive forgiveness,’” the brief stated.
The attorney for Career Colleges, Stephen Kinnaird of Paul Hastings in Washington, declined to comment on the case.
Attorney Adam Pulver of Public Citizen, a nonprofit group that filed a friend-of-the-court brief in the case, said his organization was glad that the Supreme Court decided to hear the case.
“The Fifth Circuit’s interpretation of the statute is contrary to that taken by every administration since the statute was enacted—including the last Trump administration,” he told The Epoch Times.
“It would also have the perverse negative consequences of forcing student borrowers to default on their loans to find out if they were entitled to the relief created by Congress.”
The Epoch Times reached out for comment to the U.S. Department of Justice, which represents the Department of Education, but did not receive a reply by publication time.
