A federal appeals court has temporarily halted the Biden administration’s efforts to implement a key component of its student debt relief agenda. The rule, aimed at facilitating loan forgiveness for individuals defrauded by educational institutions, has been put on hold by the New Orleans-based 5th U.S. Circuit Court of Appeals following a request from a trade group representing for-profit colleges. The court’s decision effectively delays the rule’s enforcement until an appeal scheduled for November is heard.
The ruling, issued by a three-judge panel, does not provide explicit reasons for the injunction but honors the request from Career Colleges and Schools of Texas (CCST), the trade group representing for-profit colleges. CCST had previously filed a lawsuit in February, seeking to block the U.S. Department of Education’s rule changes finalized in October. The rule modifications pertain to a program that allows students to seek debt relief if they were misled by their educational institutions.
Under the new rule, borrowers have expanded avenues for seeking debt relief in cases involving fraudulent practices. Moreover, the rule establishes a mechanism for the Education Department to grant debt forgiveness to groups of students affected by deceptive practices at their respective schools.
See also: Supreme Court’s Rejection of Debt Relief Leaves Young Lawyers Struggling
It’s important to note that this specific rule is distinct from President Biden’s broader student debt relief plan, which was previously met with legal challenges. In June, the Supreme Court prevented the administration from canceling $430 billion in student loan debt for approximately 43 million borrowers. Subsequently, President Biden unveiled alternative plans for providing relief to student loan borrowers.
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The Education Department, whose rule is currently under legal scrutiny, expressed its commitment to addressing deceptive practices within the educational sector. A spokesperson for the department emphasized their determination to hold predatory colleges accountable, provide relief to borrowers who have fallen victim to deceitful practices or school closures, and ensure that institutions engaging in deceptive schemes are held responsible.
Past instances of debt forgiveness through the program primarily benefited students who had attended for-profit colleges such as Corinthian Colleges and ITT Technical Institute. The rule changes were intended to enhance the effectiveness of the program in identifying and addressing instances of fraud and misrepresentation within the higher education sector.
Career Colleges and Schools of Texas (CCST) challenged the new rule on grounds of unlawfulness and unconstitutionality. The trade group deemed the rule an overreach, accusing it of attempting to orchestrate substantial loan forgiveness for borrowers while transferring the corresponding financial liability onto higher education institutions.
The composition of the three-judge panel responsible for this recent decision is noteworthy. All three judges – Edith Jones, Kyle Duncan, and Cory Wilson – were appointed by Republican presidents. The political backdrop could potentially influence the legal trajectory of the case, as their judicial perspectives might shape the outcome of the November appeal.
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