Supreme Court Allows Student-Loan Cancellation Settlement (1)

The US Supreme Court refused to block a legal settlement that would cancel $6 billion in debt for students who say they were misled about job prospects by a group of mostly for-profit colleges.

Rejecting an emergency request from three college operators, the high court left the accord in force while the justices decide whether to take up an appeal challenging the agreement. No justices publicly dissented.

The colleges are challenging the Education Department’s authority to cancel so many loans in a single agreement. The case resembles the Supreme Court fight over President Joe Biden’s plan to slash the student debt of more than 40 million people, though the two disputes involve different statutory provisions.

The court heard arguments on Biden’s plan Feb. 28 and is scheduled to rule by the end of June.

The borrowers in the latest case sued the Education Department in 2019, seeking action on long-pending requests to discharge their debt because of alleged wrongdoing by the schools they attended. The settlement went beyond the thrust of the lawsuit, with the Education Department agreeing to discharge loans for hundreds of thousands of borrowers who attended 151 schools.

At the Supreme Court, the schools — for-profit Lincoln Educational Services Corp. and American National University Inc. and nonprofit Everglades College Inc. — contended the department exceeded its authority under federal law.

The colleges said the administration was making an “even more sweeping” claim than with Biden’s broader loan-forgiveness program, which centers on the economic fallout from the pandemic.

“The secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country,” the schools argued.

The Biden administration and borrowers urged the court to let the settlement stay in effect. US Solicitor General Elizabeth Prelogar said the accord itself doesn’t affect the rights of the schools or impose any liability on them.

“The class-action settlement at issue here is a reasonable and statutorily authorized solution to the unprecedented problem posed by a flood of borrower-defense applications asserting a right to discharge under the applicable statute and regulations,” said Prelogar, the administration’s top Supreme Court lawyer.

The San Francisco-based 9th US Circuit Court of Appeals refused to block the settlement, prompting the college operators to turn to the Supreme Court.

The case is Everglades College v. Cardona, 22A867.

(Adds explanation of case starting in third paragraph.)

To contact the reporter on this story:
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

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