College Operators Ask Supreme Court to Block Student-Loan Accord

Three college operators asked the US Supreme Court on Wednesday to block a legal settlement that would cancel an estimated $6 billion in debt for students who say they were misled by the schools about job prospects.

The emergency application, which challenges the Education Department’s authority to cancel so many loans in the accord, bears similarities to a pending Supreme Court fight over President Joe Biden’s plan to slash the student debt of more than 40 million people.

The Supreme Court’s handling of the new case could offer hints about the outcome of the bigger fight. The court heard arguments on Biden’s plan Feb. 28 and is scheduled to rule by the end of June.

The college operators making the new appeal to the high court include for-profit Lincoln Educational Services Corp. and American National University Inc., as well as nonprofit Everglades College Inc.

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.

In its Supreme Court filing, the schools said the department exceeded its authority under federal law. The colleges said the administration was making an “even more sweeping” claim than with the 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 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 application was filed with Justice Elena Kagan, who handles emergency matters from the 9th Circuit. She could act alone or refer the matter to the full nine-member court.

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

(Updates with details on colleges in fourth paragraph.)

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

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Steve Stroth

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